Small and medium businesses (SMBs, or companies with up to 999 employees) in China are slated to spend a whopping US$46 billion on boosting their IT infrastructure (excluding telecoms) by 2010. This is up from US$21 billion in 2005, giving China-based SMBs a compound annual growth rate of 14% between 2005 and 2010.

These findings emerged from a recent study by New York-based Access Markets International (AMI) Partners, Inc. "Since its entry into the World Trade Organization (WTO) in 2001, China has grown to become a global economic powerhouse," says Diana Ng, Singapore-based senior analyst at AMI-Partners. “Riding on the current momentum, and with the Olympics in Beijing in 2008 and the Shanghai World Expo in 2010, the business and economic growth potential in China remains very bullish."

It is not just prime cities like Beijing and Shanghai that will witness spurts in SMB investments in technology. Even second-tier cities like Guangzhou, Hangzhou, Chengdu and Wuhan will ride the growth wave in areas such as formation of new businesses and expansion of current businesses. Consequently, IT investments by these businesses will intensify.

“In addition to investments on computing, SMBs in these six cities will leverage the Internet to expand their business regionally and globally," Ms. Ng says. "This translates to a forecasted spend of US$2.9 billion by SMBs in the six cities alone in areas such as high-speed Internet access deployment and channeling resources to develop corporate websites and e-commerce facilities. As a result, IT-related services spend in these six cities alone will cross US$2.9billion, up 76% over 2006 spending levels."

Infocomm vendors should therefore look outside of Beijing and Shanghai to tap into the second- and third-tier cities across the huge mainland. "As Beijing and Shanghai become saturated, it is only natural and essential to plan for entry into other nascent cities,” Ms. Ng says. "The sooner infocomm vendors realize this and act, the better their prospects will be going forward."