China’s cybersecurity industry is expected to reach 63.1 billion yuan ($8.9 billion) of revenue in 2019, up 23% from 2018, according to a report released Wednesday by a research institute under the country’s Ministry of Industry and Information Technology.

The development of 5G technologies, artificial intelligence and industrial internet have increasingly higher requirements for network security, expanding the demand for cybersecurity, according to the 2019 white paper on China’s cybersecurity industry released by the China Academy of Information and Communications Technology (CAICT).

The continuous optimization of China’s cybersecurity policy has provided a good institutional environment for the industry, said Wang Zhiqin, deputy director the CAICT.

There are nearly 3,000 cybersecurity companies, an increase of 8% from 2017. One-third of the companies are based in Beijing, 13% in Guangdong and 10% in Shanghai, according to the report.

Profit growth of listed cybersecurity companies slowed in 2018 but was still much higher than the global pace. The 10 major players posted average profit of $38 million in 2018, 7% higher than in 2017. The slower growth reflected pressures from increased research and development costs, employee salaries and stiff competition, the report said.

Contact reporter Denise Jia (huijuanjia@caixin.com)