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| Gartner Warns High-Tech Companies that China is Still a Risky Investment Despite Likely Membership in World Trade Organization |
| Research Spotlight Examines Challenges Companies Must Prepare for Before Making Long-Term Investments in the Country |
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STAMFORD, Conn., September 24, 2001 - While it appears that China will be approved for membership in the World Trade Organization this November, high-tech companies must be extremely cautious in making investments in the country, according to Gartner, Inc. (NYSE: IT and ITB).
One clear theme that emerged from Gartner's research is that development of China's technology sector is inhibited by the lack of a safe harbor for investment by small to medium foreign companies whose innovation drives the growth in the high-technology industries in developed countries. "For these companies, despite the attractiveness of China's market and technically competent workforce, the maze of rules, regulations and corruption in China are too much of a hindrance," said French Caldwell, research director for Gartner. "Without significant political and economic liberalization, foreign technology investment in China will continue to be lethargic, the province of companies large enough to make long-term investments and shrewd enough to avoid the pitfalls of China's multi-layered bureaucracy." Western companies are intrigued by China's population of 1.3 billion people. The country's economy has grown, on average, 8 percent per year for almost a quarter century. This growth has created a huge demand for the products, services and knowledge that Western companies can supply, especially those in the IT industry. "The Chinese government welcomes Western investment, but subordinates this to its strategy of building up Chinese companies to compete in a global market. The Communist Party, government ministries and the bureaucracy retain considerable control over the economy, with the result that making business decisions involves more than just economics," said Lane Leskela, research director for GartnerG2 Asia/Pacific in Hong Kong. "China's poor infrastructure and lack of familiarity with Western business norms mean that Western companies that have already transformed themselves into e-business cannot simply transfer their practices into China," said Leskela. "China's leaders have a definite vision for the economy, and Western companies have to pay attention to the larger risks, such as geopolitical conflicts between China and the United States." Gartner analysts said China's accession to the WTO comes at a time of internal political change. In 2002, new reform-mined leaders will take charge from their predecessors whose stability-obsessed political agenda was shaped by two traumatic events - Mao's cultural revolution of the mid-1960s and the 1989 massacre of students protesting for democracy in Tiananmen Square. "The new leaders understand both the potential of economic liberalization and the current political limits on the economy. They inherit a country that through membership into the WTO will have all the incentive needed for economic liberalization but which still needs major political reform to become competitive in the global economy," Caldwell said. "For the new leadership, driving both economic and political liberalization in concert will be a fine balancing act." Additional information is available in the Gartner research Spotlight titled "Key Issues for Enterprises Entering China's Market." This Spotlight has links to Gartner research that examine security, infrastructure, and political risks in doing business in China. This Spotlight can be accessed on Gartner's Web site at http://www.gartner.com/1_researchanalysis/focus/trans_china.html. For more information on how to subscribe to Gartner research programs, please call 408-468-8000. Research reports are also available on the Internet at www.gartner.com. Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut and consists of 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenue of $855 million. For more information, visit www.gartner.com. |
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Contact: Danielle Westling 203-316-6754 danielle.westling@gartner.com |
Contact: Tom McCall 408-468-8312 tom.mccall@gartner.com |
