China's small and medium businesses (SMBs) with up to 999 employees will invest more than $28bn in IT in 2007, experts predicted today.

The huge spending is buoyed by the country's surging economic growth and strong demand from end users, according to a new report from analyst firm AMI-Partners.

AMI expects that businesses with 100-999 employees will account for over 70 per cent of this spending, and that the bulk of investments will come from the manufacturing vertical segment.

"China-based SMBs see retail outlets as their channel of choice for buying a wide range of IT products, ranging from PCs and servers to printers and software," said James Cheng, a Singapore-based analyst at AMI.

"System/network integrators and value-added resellers will increase in importance in the channel space as SMBs mature in their understanding of IT infrastructure."

AMI noted that most SMBs make the bulk of their IT hardware and software purchases through national retail chains or local computer stores.

"This is largely because a big part of their total IT spending still goes towards basic computing hardware," explained Cheng.

"Over 60 per cent of SMBs prefer to buy PCs, servers, printers, networking products and even software from their local computer retail store, so vendors cannot afford to ignore the retail channel as a partner."

AMI expects spending on IT services to increase to 20 per cent of total IT spending in the SMB space in 2007.