This turbulence in the Chinese tech market is caused due to the ongoing global economic uncertainty, which has reduced demand for exports and the domestic investments.
Eight of 10 large IT vendors in China recorded decreased revenue growth in the first half of 2012.
However, the next year looks brighter as the growth forecast for 2013 is 11 percent and this expected growth is largely due to the stimulus provided by the Chinese government, which will give significant boost to high-tech (cloud services to SMBs).
Findings of the report 'China Tech Market Outlook: 2012 To 2013' indicate that China's US$105 billion of annual technology spending ranks third in the world after the US and Japan but the per-capita IT spending in China is only four percent of Japan's and three percent of the US's.
This difference highlights the long-term potential in the country and the opportunities for tech vendors to tap this lucrative market.
The ongoing continued turbulence in the Chinese tech market will increase spending in the software and services sector but will bring down investments on communications equipment or computers and peripherals.
Forrester has noted a decrease in the use of illegal software products in the public sector and at state-owned enterprises (SOEs) and expects the overall software market to grow by about 14 percent in 2013.
The use of pirated software at state-operated enterprises (SOEs) has also decreased over the past two to three years, but there has been no decrease in the use of illegal software in the private sector.
IT consulting services will grow by 17 percent in 2012 and more export-focused Chinese companies will need IT consulting services to build their customer relationship management (CRM) and local supply chain management (SCM) solutions when expanding in the domestic market.
IT outsourcing growth will pick up in 2013 and growth in the communications equipment segment will slow from 10 percent in 2012 to five percent in 2013.
Computer equipment and peripherals will grow eight percent in 2012 and 13 percent in 2013.
Looking forward, an increase in IT investment from multinationals will boost the confidence of the private sector in China and these companies will then be encouraged to spend on new IT projects.
The government is likely to issue a new stimulus package that will drive infrastructure, education and IT sectors.