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China catching up in software race

Beijing, May 15: The Chinese government’s statistics have always been the most inscrutable aspect of this country, and last week authorities here bowled another googly.

On May 9, Ding Wenwu, the deputy president in the ministry of information industry (MII), was quoted by the China News Service as saying that the country’s software exports in 2004 had exceeded India’s.

The news caught the headlines everywhere and pundits began gravely proclaiming the end of India’s dominance in the global software industry.

But a little due diligence shows Ding’s claim to be hollow. By MII’s own numbers, China’s software exports for 2004 were $2.8 billion. In contrast, India’s software exports for 2003-2004 were $3.8 billion, according to the Software Technology Parks of India.

Although China’s $2.8-billion figure represents a six-fold increase since 2000 when China’s software exports were $400 million, the comparison with India looks even more negative when one factors in income from IT-related services. China’s figure for 2004 then grows to $4 billion, but India’s jumps to $12.5 billion.

Still, there is no denying that China is catching up with India in the software industry. In 2002, Sunil Mehta, vice-president of the National Association of Software and Services Companies (Nasscom), had predicted during a visit to China that in 2005, the country’s software exports would be $1.5 billion and India’s would be $23 billion.

That he underestimated China’s potential by 100 per cent while overestimating India’s is indicative of how the software competition between China and India is panning out.

Ding said China’s growth was the result of smart policies the state council, China’s cabinet, put in place five years ago. These, he said, led to the establishment of 11 national software industry bases, six national software export bases and 172 national key software enterprises. The government and the private sector have also invested billions of dollars in hi-tech financing, technology, professional training and purchase and protection of intellectual property rights.

While India’s strength is in enterprise or corporate software, most of the growth in the Chinese software industry has come from the computer games segment. This has sparked the runaway success of numerous domestic gaming firms, such as the Nasdaq-listed Shanda Interactive Entertainment Ltd. Its chairman and chief executive officer, Chen Tianqiao, is now China’s richest person with an estimated fortune of $1.11 billion.

Significantly, China’s largest enterprise software company, the privately-owned Kingsoft Corporation, is also gearing up to enter the big league with a $100-million to $300-million initial public offering later this year.

However, China’s software industry continues to suffer from manpower problems, according to a recent survey by a committee of the China Youth Software Promotion Project. The country lacks special institutions to train managerial and technical staff for software development and as a result, companies have difficulty in recruiting qualified programmers, the survey said.

Still, the sheer size of the Chinese software and gaming market continues to attract foreign investment and ironically many Indian companies are leading the way.

Indian software giants like Tata Consultancy Services (TCS), Infosys, Wipro and Satyam are being wooed by high-profile projects, such as Beijing’s Zhongguancun Software Park, dubbed “China’s Silicon Valley”.

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