Nurturing outsourcing in China

NANJING: China has enough resources to eventually overtake India in business outsourcing services, a leading think tank economist said.

"China has great potential to surpass India in this regard. Our only disadvantage is a lack of English proficiency," said Wu Jinglian, a senior researcher with the Development Research Center of the State Council.

At a recent panel discussion on economic restructuring and service outsourcing in Nanjing, the capital city of Jiangsu province, Wu said China has become more competitive in manufacturing and outsourcing sectors.

However, Wu said, China still lags India, which generated nearly 60 percent of outsourcing revenues worldwide last year.

The US-based consulting firm McKinsey reported that while China has posted rapid growth in outsourcing, India's market value was nine times that of China.

Tang Min, deputy general secretary of the China Development Research Foundation, suggested that China follow "different paths" than India to develop its growing outsourcing services sector.

Tang suggested that Chinese companies avoid competition in low-end service outsourcing sectors such as ticket booking.

Instead, Tang said, Chinese companies should consider acquiring competitive outsourcing businesses. In this economic downturn, the costs of those acquisitions will be lower, he added.

Wu and Tang said they were impressed at Nanjing's rapid progress in service outsourcing.

The city's outsourcing sector grew 398 percent during the first five months of 2009, with contract volumes reaching $670 million.

"This progress can help build our national confidence to restructure our economy in the years to come," Wu said.

Nanjing has enjoyed preferential policies encouraging fast development of outsourcing in information technology software development, animation, and industrial design and research services.

The city hopes to become a global service outsourcing base within the next five to 10 years.

Nanjing is among 20 cities such as Beijing, Shanghai, Xi'an, Suzhou and Hangzhou selected by the central government as pilot outsourcing regions.

The designation allows companies that locate in these cities to receive tax breaks and other benefits.

For example, outsourcing companies will be offered a subsidy of up to 4,500 yuan a year for each college student employed for a minimum one-year contract.

"China has been given the opportunity to grow and nurture a new economic development engine," Wu said.

(China Daily 07/13/2009 page5)