IBM taps banks, smaller business for China growth

By Kirby Chien and Jack Reerink

BEIJING (Reuters) - IBM (IBM.N: Quote, Profile, Research, Stock Buzz), the world's biggest computer-services firm, aims to beat the industry's growth in China as banks upgrade their technology and medium-sized firms invest to cut costs.

Henry Chow, the chief executive of International Business Machines Corp. in China, said at the Reuters China Century Summit that bank restructuring and rising competition is forcing companies to invest in technology.

"The banks will continue to put in a lot of management focus and a lot of investment in the coming 3 to 5 years," said Chow, a 38-year veteran at Big Blue.

The Bank of China (3988.HK: Quote, Profile, Research, Stock Buzz) (601988.SS: Quote, Profile, Research, Stock Buzz), for example, is spending 10 billion yuan (US$1.25 billion) over the next three years to upgrade its information systems and centralize its data and back-office operations.

All Chinese banks are ramping up efforts to serve a fast-growing middle class created by the country's galloping economy, with credit cards, mortgages, insurance policies and investment portfolios becoming increasingly popular.

IBM -- which has about 10,000 staff in China -- has its sights solidly on the bottom line, Chow said, unlike companies focused solely on expanding the business.

"People believe there's so much potential out there: If you lose money it's OK," Chow said. "It's important we don't compete on price."

The growth in investment from the banks and from small- and medium-businesses in China will help IBM rebound from a lackluster 8 percent growth in revenues it recorded in 2005.  Continued...