The Exponential Power of 'Chindia'

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The pivotal issue in forecasting the country's future is China's ability to set a practical course to ease government influence in its economy and to promote innovation.

Don't Ignore Chinese Politics

The first reaction to this for many people might be that government policies and government relations are "not my specialty and not my problem." The lawyers and government-relations pros, not chief information officers and IT executives, are the ones who worry about what the politicians and regulators are up to. Their job is to place calculated bets on big issues and market trends in cost-effective, innovative IT.

For business and IT leaders, such views are not only flawed but dangerous, especially when it comes to China. The government is often the biggest factor in IT issues and trends in China, and business leaders can't afford to delegate these relationships or distance themselves from the core analysis.

The direct challenge for China is whether it has the ability to move from a low-cost, high-volume manufacturer to the top of the global value chain commanding the heights of innovation and global marketing prowess. Can China transfer its demonstrated expertise in low-margin, high-volume hardware manufacturing into high-margin software and IT services?

Chinese Brands on the Rise

By 2008, it is highly likely that we will see China generate intellectual property at a rate comparable to developed countries and, in the same year, actually surpass the U.S. as the population with the largest English language capacity (in terms of English language comprehension and proficiency). However, China will remain a challenger, not the global leader.

We anticipate at least eight Chinese IT brands will be recognized internationally by 2010. If government restrictions are loosened and the Chinese instinctive talent for entrepreneurialism continues to be encouraged, we will witness the birth of a real IT superpower.

You might not realize this now, but whether China emerges as a global leader in science and technology innovation relevant to the information and communications technology (ICT) industry is in fact a crucial issue for you as a business strategist or IT decision-maker in a Western organization. The result will play a key role in which global suppliers can establish a strong presence in China for the long haul, as well as helping to decide which of China's strongest domestic companies can compete in international markets.

While the answers may not become clear for several years, the questions of China's and India's role in the global IT market cannot be ignored. The potential rewards from being involved in China greatly outweigh the risks of watching from afar.

In our next article we will explore India's role in the global IT market and what companies need to do to develop a Chindia strategy.

Partha Iyengar is vice president and distinguished analyst at Gartner Inc. [IT] Jamie Popkin is Gartner group vice president and research fellow. They are the authors of "IT and the East" published in May 2007 by Harvard Business School Press and distributed in Australia by McGraw-Hill (which also owns BusinessWeek). The book examines how China and India are altering the future of technology and innovation. For more information on Gartner Books, visit www.gartner.com.