Page 494 - 2021 White Paper
P. 494
1 White Paper on the Business Environment in China
Covid may have the effect of accelerating partnering to stay in the market. As the market
China’s shift to the cloud. The country’s post- matures, there are fewer first-time buyers of
Covid recovery is expected to boost demand for ICT. China’s cost advantages have also declined
cloud computing services, driven by traditional as production is increasingly moved elsewhere.
businesses rethinking their future strategies, as China’s ICT policy environment presents a
supply disruptions during the pandemic may serious challenge. China views the sector
have led to cash flow problems. Companies new through a commercial and national security
to the cloud market or which had been lured into lens. Policies intended to ensure security often
trying cloud services during the Covid outbreak appear to do so at the expense of foreign
could also end up becoming paying customers. companies’ interests. China’s first Cybersecurity
Meanwhile, enterprises may accelerate cloud Law went into effect on June 1, 2017. The law
initiatives to facilitate remote working and remote establishes a framework for regulating China’s
interactions. This scenario is also expected to play networks on national security grounds, and for
out around the world, with the IDC forecasting the supervision of the ICT sector more generally.
global IT spending to decline 5% this year, while The law details the security obligations of internet
IT infrastructure spending is expected to grow products and service providers, institutes rules
3.8% to US$ 237 billion driven by cloud spending. for the transmission of data, and enhances
Companies are expected to maintain their the rules on personal data protection. China
cloud spending as a way of controlling costs, continues to roll out implementing measures for
while deferring expenses on other IT spending the law. Lack of clarity about how the law will
such as existing on-premise data centers and be enforced remains a top concern for many ICT
applications. In the first quarter of 2020 alone, companies active in China’s market. Data privacy
cloud infrastructure spending globally grew is a critical component of the Cybersecurity Law
34% to US$ 31 billion, driven by remote working and is an area where the Chinese government
demand due to the Covid outbreak, although this has been particularly active. China’s new data
was offset by a slowdown in migrations from large measures trends attracted significant industry
enterprises (LD Investments). concern due to inconsistencies with international
practices on data transfer and data localization,
Background which could heavily impact international
businesses’ operations. Over the past decade,
China’s information and communication China has consistently ranked as one of the
technology (ICT) market is among the most largest and fastest growing country markets
dynamic sectors in the economy. The market for U.S. semiconductors and semiconductor
was projected to reach $8.1 trillion by 2021, manufacturing equipment and will continue to
representing 55% of China’s GDP. China’s ICT do so in the near term. China represents 50%
imports in 2017 totaled $528 billion, while its (US$168 billion) of the US$336 billion global
exports reached $781 billion. As China’s ICT semiconductor market. Headwinds brought
market develops, certain sub-sectors that have on by slowing global demand for ICT products,
been driving growth (e.g., smart phones) are slowing transitions to smaller IC manufacturing
predicted to become saturated; future growth nodes, and a strong dollar, however, will be
will be fueled by integrating ICT technologies exacerbated by China’s opaque policies and
into, and transforming, traditional industries. For unprecedented state-led investment to develop
international firms, big opportunities in China’s an indigenous semiconductor industry. China’s
ICT market are tempered by real challenges. policies, which are intended in part to reduce
Due to rapidly maturing domestic competition, reliance on international semiconductor imports,
foreign companies no longer have a dominant create medium and long-term uncertainties
market share in many of China’s ICT sub-sectors. for US industry prospects in the Chinese
Chinese firms have been adept at mastering market. While a gap remains between China’s
technologies and shaking up markets, often by demand and production of semiconductors,
offering low prices. US firms are increasingly with the support of the Chinese government
– including significant state funding directed
494
Covid may have the effect of accelerating partnering to stay in the market. As the market
China’s shift to the cloud. The country’s post- matures, there are fewer first-time buyers of
Covid recovery is expected to boost demand for ICT. China’s cost advantages have also declined
cloud computing services, driven by traditional as production is increasingly moved elsewhere.
businesses rethinking their future strategies, as China’s ICT policy environment presents a
supply disruptions during the pandemic may serious challenge. China views the sector
have led to cash flow problems. Companies new through a commercial and national security
to the cloud market or which had been lured into lens. Policies intended to ensure security often
trying cloud services during the Covid outbreak appear to do so at the expense of foreign
could also end up becoming paying customers. companies’ interests. China’s first Cybersecurity
Meanwhile, enterprises may accelerate cloud Law went into effect on June 1, 2017. The law
initiatives to facilitate remote working and remote establishes a framework for regulating China’s
interactions. This scenario is also expected to play networks on national security grounds, and for
out around the world, with the IDC forecasting the supervision of the ICT sector more generally.
global IT spending to decline 5% this year, while The law details the security obligations of internet
IT infrastructure spending is expected to grow products and service providers, institutes rules
3.8% to US$ 237 billion driven by cloud spending. for the transmission of data, and enhances
Companies are expected to maintain their the rules on personal data protection. China
cloud spending as a way of controlling costs, continues to roll out implementing measures for
while deferring expenses on other IT spending the law. Lack of clarity about how the law will
such as existing on-premise data centers and be enforced remains a top concern for many ICT
applications. In the first quarter of 2020 alone, companies active in China’s market. Data privacy
cloud infrastructure spending globally grew is a critical component of the Cybersecurity Law
34% to US$ 31 billion, driven by remote working and is an area where the Chinese government
demand due to the Covid outbreak, although this has been particularly active. China’s new data
was offset by a slowdown in migrations from large measures trends attracted significant industry
enterprises (LD Investments). concern due to inconsistencies with international
practices on data transfer and data localization,
Background which could heavily impact international
businesses’ operations. Over the past decade,
China’s information and communication China has consistently ranked as one of the
technology (ICT) market is among the most largest and fastest growing country markets
dynamic sectors in the economy. The market for U.S. semiconductors and semiconductor
was projected to reach $8.1 trillion by 2021, manufacturing equipment and will continue to
representing 55% of China’s GDP. China’s ICT do so in the near term. China represents 50%
imports in 2017 totaled $528 billion, while its (US$168 billion) of the US$336 billion global
exports reached $781 billion. As China’s ICT semiconductor market. Headwinds brought
market develops, certain sub-sectors that have on by slowing global demand for ICT products,
been driving growth (e.g., smart phones) are slowing transitions to smaller IC manufacturing
predicted to become saturated; future growth nodes, and a strong dollar, however, will be
will be fueled by integrating ICT technologies exacerbated by China’s opaque policies and
into, and transforming, traditional industries. For unprecedented state-led investment to develop
international firms, big opportunities in China’s an indigenous semiconductor industry. China’s
ICT market are tempered by real challenges. policies, which are intended in part to reduce
Due to rapidly maturing domestic competition, reliance on international semiconductor imports,
foreign companies no longer have a dominant create medium and long-term uncertainties
market share in many of China’s ICT sub-sectors. for US industry prospects in the Chinese
Chinese firms have been adept at mastering market. While a gap remains between China’s
technologies and shaking up markets, often by demand and production of semiconductors,
offering low prices. US firms are increasingly with the support of the Chinese government
– including significant state funding directed
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