China PC market grows 40%

China's PC industry grew by a robust 40 percent in 1997, with gains expected to continue despite Asian market turmoil.

Sales of 3 million PCs produced revenues totaling 30 billion renminbi ($3.6 billion), according to the government-run Xinhua News Agency, which cited figures released by the Ministry of Electronics Industry.

Chinese firms sold 1.8 million units, raising their market share five points, to 60 from 55 percent.

The rapid growth comes as no surprise. International Data Corporation predicts China will surpass Germany to become the world's third-largest PC market by the year 2000. Last year, China leapfrogged South Korea to take its place as the second-largest PC market in the Asia-Pacific region, after Japan.

Asia's currency crises and Japan's ongoing economic slump aren't expected to depress the China's PC market. The country maintains sizeable foreign reserves and the renminbi is non-convertible, meaning China is somewhat insulated from struggling neighboring economies.

In fact, IDC previously forecast for 1998 a 30.5 percent increase in total PC shipments, but last month readjusted the figure to 33 percent. The ability to match consumer demand and low price points will maintain the domestic market's growth even as markets from other Asian countries decline, according to IDC analyst Lisa Cosmas.

Additionally, government initiatives seem to indicate that developing a strong information technology (IT) base is a national priority. This past October, president Jiang Zemin expressed his intention to join the Information Technology Agreement (ITA) during a meeting with President Clinton. The agreement calls for tariffs on IT products to be eliminated by the year 2000.

But the increasing share being gobbled up by local manufacturers is a bit unexpected. In 1996, Compaq topped Chinese PC sales. Last year, domestic manufacturer Legend Group lead manufacturers with a 7.6 percent share, ahead of IBM, Hewlett-Packard, and Compaq, according to IDC figures.

1997 was such a promising year for Legend that in May it announced it would expand its operations throughout the Asia-Pacific market. The company plans to extend further, to the U.S. and European markets, sometime this year.