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IT vendors brace for tougher times as economy loses steam

By Wang Xing (China Daily)
Updated: 2008-12-02 10:17

IT vendors in China are starting to feel the pinch from the economic slowdown as sales slacken in Zhongguancun, the technology hub in the country.

Leon Lee, sales director of Beijing Ding Gu Real Estate Development, told China Daily yesterday that over five percent of 3,000 venders in Dinghao, the largest IT shopping mall in Zhongguancun run by Lee's company, have decided not to re-rent next year. The number was about one percent last year.

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"The market was heavily impacted as many domestic companies have cancelled or postponed their purchasing plan due to a gloomy forecast," said Lee, adding that the company plans to reduce the rent by five to 10 percent to retain counters and restore the market confidence.

At the front lines of a battle between companies like Lenovo, Dell and Hewlett-Packard, IT vendors in Zhongguancun may be among the first to feel the chill that the US financial crisis brought to China's IT industry.

As thousands of Chinese exporters were forced to shut down their businesses, corporate demands for IT facilities and consumers' fervor for cool electronic devices seem to be fading in China's once-dynamic IT retail market.

"It is strange that as if just all of a sudden no one comes," says Sun Jialiang, sales representative of a Lenovo retailer in Dinghao shopping mall. "In October we were still busy with consumers but just one month later our customers declined by 50 percent."

Wang Weiguang, an HP retailer in Hailong, another major shopping mall in Zhongguancun, also said his business slumped 30 percent last month. "As companies shut down, employees lay off and the stock market slumped to a bottom, who will have the leisure money on fancy digital devices?" he said.

The growth rate of IT products such as PCs, digital cameras and MP3 music players have kept one of the world's fastest speeds during the past several years, making China one of the most attractive markets for consumer electronics companies.

However, sales of digital devices have been hit since the beginning of the year when several natural disasters such as the snowstorm and the Sichuan earthquake disrupted consumers' purchasing plans. The following Olympic and Paralympic Games further distracted consumers from the usual hot summer promotion campaigns of many IT vendors.

"We did see a market slowdown in China from July to September," said Antonio Wang, research manager of IDC China. "But the following financial crisis further hit the market demand to a large extent, especially to the SMEs and consumer market."

Wang said the growth rate of China's PC market will drop to 8.7 percent next year, down from 14 percent predicted this year and 26 percent last year. He said the market will not see a rebound until the second quarter of 2010.