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Posted by Bryan Wang on March 7, 2012
On Monday, March 5, China announced that its GDP target for the full year 2012 is 7.5%, lower than the government target of 8% in 2011. This number is also lower than many financial analysts’ estimates and the IMF’s latest estimate of 8.2% in February. At the same time, the government also announced that its consumer price index (CPI) growth estimate is 4% — the same as the 2011 target.
This slight decrease is in line with our recent observations of the overall China economy. Some key reasons for the reduced estimate include:
Other challenges to sustaining strong GDP growth include increased government control of the real estate market in the form of forbidding households from purchasing third properties (which has a significant impact on many relevant industries) and insufficient government support to the private sector for securing bank loans (especially those state-owned banks mostly issue loans to state-owned enterprises only).
All of these challenges make the Chinese government worry about maintaining a reasonable level of growth — and the political stability that comes with it. We believe that the government has to increase its support of the private and SME sectors to continue growth and avoid any political instability before the government changes in 2013.
What does it mean for the IT market?
In summary, we believe that SMEs will be the key battlefield in the next three to four years for IT vendors, while partnership/M&A opportunities will increase for MNC vendors to better get access to customers in China.
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