China imported USD$245.2 billion of ICT/Electronic products in 2007, approximately two-thirds of which were electronic components.  Exports of ICT/Electronic products from China in 2007 reached USD$459.5 billion, accounting for 37.7% of the country's exports.

Overall revenues of ICT/Electronic products in 2007 increased by 18%, with computer manufacturing, communications equipment manufacturing and electronic components accounting for over 61.4% of revenues.

2009 is expected to be a challenging year for both China’s economy and China’s IT market. IDC, global provider of market intelligence, recently lowered expectations for China’s ICT market in 2009, adjusting the size of the market to US$71.16 billion, with the growth rate down from 13.5% to 9.1%.

The ICT market and its sub-sectors in China are enormous and continued growth is expected, but the industry is intensely competitive and there are many challenges in the regulation and management of the ICT industry which impact foreign participation in the market.

Domestic companies are growing ever more sophisticated and are now also looking outward to establishing themselves in international markets. There exists a strong bias toward large multinational companies with strong global brands and local presence. The Internet in China is strictly regulated by censorship, monitoring, and enforcement rules. The protection of intellectual property rights is of constant concern.

China is focusing much effort and resources to improve its innovation capabilities. The State Council's Medium and Long-term Plan on S&T Development (2006-2020), calls for the government to actively take part to foster domestically-produced innovative technologies and reduce dependence on foreign technologies. This can present negative effects for foreign companies as the use of domestic standards and government procurement policies to favor indigenous innovation gives preference and protection to domestic industries.

The regulatory framework of the ICT sector is complicated in China. The major watchdog is the Ministry of Industry and Information Technology (MIIT). Other government authorities involved in the ICT sector, depending upon the sub-sector, could include Ministry of Science & Technology (MOST), Ministry of Public Security (MPS), General Administration of Press and Publication (GAPP), and State Administration of Radio, Film and Television (SARFT).

China's 11th Five-Year Plan features the development of the information industry prominently. The Ministry of Industry and Information Technology (MIIT)'s key goals for the 2006-2010 timeframe are as follows:

Sub-sectors review:

Telecom - Wireless Value-Added Services (WVAS)

Overall, China’s   telecommunication industry is growing steadily. However, current trends show that fixed-line telephony has begun to shrink, while mobile market is growing at a rapid pace. The number of mobile subscribers in China grew by 18.1% last year, yet the national penetration rate only sits at 45.6% (as of July 2008), which is relatively low in comparison to most western countries. Broadband internet is replacing dial-up and the number of users has been growing quickly (16% last year) and has already reached 250 million users.

Major domestic equipment vendors and handset manufacturers are: Huawei, ZTE, Potevio, Datang, Fiberhome, Haier, and TCL. Major foreign players include: Nokia, Motorola, Nortel, Samsung, Sony Ericsson and Alcatel–Lucent.

SMEs with niche technologies will find it difficult to access the large telecom operators. The operators are typically interested in being presented with a complete package that offers a full solution to meet tendering requirements. In light of this, foreign may find more success in partnering with local system integrators which have existing relationships with large telecom operators.

Photonics

The potential of the Chinese photonics market (fiber optics and lasers) is large and domestic capabilities are lacking, with strong dependence for advanced technology from foreign firms. China's internet users number at the end of June 2009 hit 338 million (No. 1 in the world) with Internet penetration 25.5%, among which 155 million people in China access Internet via mobile. This increasing demand for bandwidth is greatly spurring network expansion. China's telecom operators are thus focusing on long-haul optical backbones, multi-service IP optical Metro-Area-Networks (MANs), automated, switched optical networks, passive optical networks and fiber-to-the-home (FTTH).

China's optical industry is dominated by Huawei and ZTE in equipment manufacturing. In fiber and cable production, FiberHome, Yangtze Fiber Optics Corporation, Jiangsu Hengtong and Jiangsu Fasten are the dominant players. The main foreign players include Alcatel-Lucent, Corning, Nortel Networks, and NKT. China's manufacturers are currently producing high-levels of output of optical fiber and optical cable – while this domestic overcapacity can be of concern, specialized optical fiber and cable products, niche expertise and advanced technologies can present opportunities for new entrants.

Software

In the period 2001-2007, China's software industry grew from RMB 7.96 billion to RMB 584.2 billion.  There is heavy investment by the government, SOEs and private sector in the "informatization” of public infrastructure, utilities and company operations which presents much demand for software solutions and system integration. Government procurement, however, favors domestic software and software services.

Application software accounts for roughly 2/3 of the total Chinese market. Types of applications in demand include management software solutions, educational/training based software, entertainment/gaming software, as well as emergency response, security, and transportation systems.

There is a growing awareness of China as an offshore outsourcing location and as an emerging IT powerhouse. Major cities in the region have all identified outsourcing services as their next area of focus for the development of their software industry. In 2006, MOFCOM initiated a project to establish eleven “service outsourcing base cities" (Chengdu, Xi'an, Shanghai, Shenzhen, Dalian, Beijing, Tianjin, Nanjing, Wuhan, Jinan and Hangzhou) to attract MNCs to establish offshore service outsourcing in China.

Digital/New Media

The video game market has become a key driver of the new media and creative industries in China. The online game market is currently valued at approximately RMB 12.80 billion (representing a year-on-year increase of 66.7% from 2006) and is expected to surpass RMB 20 billion by 2010. Between now and 2010, the expected compound annual growth rate (CAGR) for online game revenue is 33%.  Online game penetration among internet users already stands at 22%, representing close to 40.17 million gamers.  By 2010, that number is expected to hit 84 million users. The online gaming market is being driven by the growth in MMORPG and casual games.

Domestic firms are growing rapidly as they are able to provide content that meets local demands and cater to local consumer preferences. The top 5 game operators in China are Shanda, Netease, The9, Giant and Tencent and account for over 65% of the local market share. Shanda, Netease, Giant and Tencent are also the major game developers.