China plans to boost its software exports by 25% each year in a bid to reach $10bn of exports by 2010.

That's
a pretty aggressive growth rate but China needs to step on the
accelerator if it is to close its current yawning gap with India, whose
software exports rose 23% to $23.4bn in the year to March 2006.

According
to figures from the Ministry of Commerce, China exported $3.6bn worth
of software and related services in 2005, a rise of 28% year on year.

China
wants to foster “globally competitive software firms with their own
brands and intellectual property rights”, according to this Xinhua story.

Software
firms will thus receive preferential treatment in areas like taxation,
borrowing and foreign exchange controls, among other areas.

This
heavy promotion of a home-grown domestic software industry makes a lot
of sense. China realises that its long-term economic growth depend on
knowledge-based industries like software rather than cheap
mass-manufactured goods.

In addition, China's current
manufacturing-led export success is causing tremendous frictions with
western trading nations, particularly in industries that have been hard
hit by Chinese counterfeiting of western goods.

Promoting a
Chinese software industry based on home-grown IPRs is thus a smart
tactical move, as it should helps deflect some of the continuing
criticism levelled at China. And it has the support of some of the
biggest names in the western-dominated software industry, not least
Microsoft — see yesterday's EngagingChina story.

While
still relatively small, China's software industry is growing in
sophistication and increasingly focused on export markets. For example,Rising,
a Chinese maker of anti-virus software, is now signing up distributors
in the west and its products have just obtained certification from
Germany's TÜV testing agency .

While China's software industry
is growing fast, it has a long way to go before it can catch India. The
Asian rival has long dominated the software offshoring industry and
Indian IT outsourcing firms see China more as a new market opportunity
than a threat. Indeed, many are increasing their presence in China in
anticipation of growing demand for their services from foreign and
Chinese businesses based in the PRC.

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