ABACUSsmall.JPGChina's 25m small businesses have the highest PC penetration among Asia's four most populous countries.

The surprising statistic should help counter the common western
perception that China's small businesses still do their counting on
abacus.

It should also provides food for thought for western IT vendors, who
have to date been surprisingly slow to wake up to the huge untapped
potential of this market — 85% of China's enterprises are small
businesses.

According to the latest study
(pdf) by US research firm AMI Partners, one third of China's small
businesses have a PC, compared to 22% in India, 24% in the Philippines
and 18% in Indonesia.

Nevertheless, that still means that two out of every three Chinese
small businesses do not have a computer and in the other Asian
countries, the percentage is even higher. Dev Chakravarty, analyst with
AMI Partners, says:

It is surprising that even today, a huge majority of small
businesses conduct their daily business without the help of computers.
However, there is a huge latent need among these businesses for PCs
that can be fulfilled by PC vendors that focus on the Asia-Pacific
region.”

Most of the small businesses that do not have PCs have less than 10
employees, and in China they are mostly concentrated in the
manufacturing sector.

What hinders them from buying PCs? The primary hurdle is the belief
that PCs are not relevant to their line of business. About 14% of
non-owners in China told AMI that they just have not thought about
buying PCs. A significant portion of small businesses believe that a
simple fax and phone is enough for their business. Lack of knowledge
about the installation and operation of PCs is also a powerful
deterrence.

Mr. Chakravarty says financing is not really an issue. So, vendors
need to work hard on educating small businesses as to the value of IT
rather than waste time and money on financial incentives.

Separately, the People's Daily reports there were 25m registered small businesses in China by mid-2006, an increase of 1.7% over the 12 months.

The number of private domestic companies — which are larger than
small businesses — has grown much faster, albeit from a much smaller
base and rose 8.1% to 4.6m.

Jiangsu province has the largest number of private enterprises, followed by Guangdong, Shanghai, Zhejiang and Shandong.

The private sector is projected to contribute three quarters of
China's GDP in five years, when at least 70% of the country's firms
will be privately owned, predicts the Chinese Academy of Social Sciences.


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