Information technology (IT) spending in this country is swelling, and the amount spent by China's financial sector looks likely to increase 10 percent annually for the next three years.

Total IT spending in the country's financial sector is likely to hit 30.3 billion yuan (US$3.74 billion) during 2006, up 10.24 percent year-on-year, according to a latest report by leading domestic market research house CCW Research.

Moreover, the growth momentum will continue until 2008, at about 10 percent each year. Spending in 2008 is projected to reach 37.7 billion yuan (US$4.65 billion).

The sector's new round of increasing IT budget is mainly driven by banks' swift moves in informationization.

Specifically, IT system upgrades in core businesses among domestic banks could be a buzzword in coming years.

"As banks have become more client-oriented rather than business-oriented in operations nowadays, new-born services such as building personal credit accounts require IT facility upgrading," Shen Shaoxun, an analyst with CCW Research, told China Daily.

Commercial city banks and other small and medium-sized banks, more flexible in operations, will take the initiatives, she said.

The State-owned "Big Four" banks have strong research and development forces of their own, leaving little business for public bidding and providing much less opportunities for IT vendors, Shen said.

Meanwhile, as the country has began to establish its provincial-level rural credit co-operatives nationwide, the mass amount of data collection will generate great need in IT infrastructure, which was nonexistent before.

And data collection will be given top priority in the informationization of these co-operatives right into 2006, Shen noted.

Other businesses absorbing major IT spending include banks' disaster-precaution and e-payment systems.

In addition, anti-money laundering and individual credit system building, which are headed by the central bank with earmarked investment from the government, will witness the fastest growth, said the report.

In 2006 domestic banks are expected to spend a total of 26.3 billion yuan (US$3.2 billion) on IT, up 10.55 percent year-on-year.

Next year the securities sector will experience its first increase in IT spending since 2002, up 5.54 percent year-on-year hitting 2.29 billion yuan (US$282.3 million). That is a result of the government measures to stimulate the market, including opening certain financial derivatives products.

In insurance, rapid business expansion with accelerated opening of new branches, and the emergence of new insurance companies all will bring constant demand for IT facilities.

Focusing on core business systems, data consolidation, CRM (customer relation management) system and online services, the segment is projected to invest 1.7 billion yuan (US$209 million) next year, up 12.2 percent year-on-year.

China's financial sector spent 27.5 billion yuan (US$3.4 billion) on informationization this year, a slight growth of 3.42 percent from 2004.

(China Daily December 23, 2005)