Beijing, March 10, 2005
—The International Finance Corporation, the private sector arm of the World Bank Group, today released a study showing that Chinese private entrepreneurs are driving rapid growth of the information and communications technology sector despite limited access to domestic sources of capital. There are now as many as 450 integrated circuit design firms based in China, including entrepreneurial ventures. More than 70 companies operate online games with many more active in game development. Domestic entrepreneurial activity is driving growth in mobile data, e-commerce, security software, and software outsourcing, among other subsectors.
The study, “The ICT Landscape in the PRC: Market: Trends and Investment Opportunities” was prepared for IFC by the consulting firms Spintrack AB and BDA China. It was sponsored and funded by the Swedish International Development Corporation Agency.
The study shows that foreign capital and investment support has encouraged extensive start-up activity in China. It cites statistics showing that venture capital provided nearly $1.3 billion in foreign investment to 253 Chinese ICT companies in 2004. Venture capital has been encouraged by growing exit strategies. In 2004, for example, there were 24 venture capital backed Chinese ICT initial public offerings that raised $4.3 billion in international markets. In addition, the last two years has seen leading foreign technology firms, including Amazon, eBay, and Google, make investments or acquisitions in China
“Less established Chinese companies lack access to domestic capital, so there is a continued need to encourage investment in companies that strive to adopt international best practices and can take advantage of the enormous business and development opportunities in this sector,” said IFC Associate Director Karin Finkelston. “Information and communications technology play an important role in the economic transformation of the Chinese economy and in promoting sustainable development,” added Joseph Solan, Senior Manager of the World Bank Group’s Global Information and Communications Technologies Department.
Across ICT subsectors covered in the study, the growing importance and scale of investments in research and development is a common theme. For example, game companies are seeking to develop new products domestically rather than importing them, while integrated circuit design firms and telecom equipment vendors are increasingly striving to develop new products.
The explosive growth in China’s telecom sector has been one of the key drivers behind growth in ICT companies. China is now the largest mobile and fixed-line subscriber market in the world with more than 330 million mobile subscribers and 310 million fixed-line subscribers. Close to 100 million people in China were accessing the Internet by year-end 2004. This large base of consumers has created opportunities for application providers in mobile data, online gaming, e-commerce, and digital media. Many Chinese integrated circuit design firms are focusing on semiconductors used in mobile handsets or other telecom products to tap into this market opportunity.
Through a comprehensive overview of the information and communications technology sector, the study provides analysis of key trends and business opportunities. It includes coverage of the infrastructure and software subsectors, including telecom equipment and fabless chip design, software and security services; the applications subsector, including mobile data, online gaming, e-commerce, and digital media applications; and the outsourcing subsector, including software and information technology services outsourcing and handset design.
About International Finance Corporation
The International Finance Corporation is the private sector arm of the World Bank Group. The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in emerging markets, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in transition and developing countries, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
The World Bank Group’s Global Information and Communication Technologies Department promotes the transfer of communications and information technologies to the developing world. The Information Technologies group within GICT is a stage-independent investor with an exclusive focus on building successful information technologies businesses in emerging markets. GICT brings a global perspective and a long term approach to investments, an ability to leverage resources of the entire World Bank Group as well as a commitment to maximize value of its portfolio companies through sustained strategic assistance.
About Spintrack AB
Spintrack offers research and independent advisory services in areas such as management, ICTs, investments, project financing, research and development, policy and small and medium enterprises, and business development. Our clients comprise private companies, government agencies and international organizations. Spintrack has developed a deep understanding of dynamics of business climate and research and development in emerging markets, especially in the ICT sector. Spintrack has extensive experience working in the confines between technology and business, and regularly performs market studies on business expansions, searches for partners, or prospects at acquisition or sale. Spintrak provides independent advice to investors, private companies and public agencies seeking neutrality, confidentiality and integrity. Spintrack is based in Stockholm, Sweden, and carries out more than half of its activities for international clients.
About BDA China, Ltd.
BDA is the leading provider of strategy consulting services and independent research for China's telecom and technology sectors. With the longest track-record in the industry, BDA has successfully guided strategies of industry participants and investors since its establishment in 1994. BDA combines a strategy consulting practice with a track record of providing independent market research and analysis. Consulting services are grounded in a thorough understanding of market reality and a commitment to meeting clients’ goals. Research services provide information and analysis on an ongoing basis providing the competitive edge necessary to make timely, well-informed decisions.
