China should strive to be "global office" of service outsourcing

With the entry into 2007, a term with a high frequency use, "service outsourcing," has been added to China's policy on use of capital from overseas. The Ministry of Commerce discloses that the country is expected to build 10 "service outsourcing"base cities to attract 100 ace transnational firms to transfer their service outsourcing business to China and breed 1,000 big or medium-size service outsourcing enterprises with international accreditations during the period of its 11th Five-Year Program from 206-2010.

"Service outsourcing represents a salient hallmark of the 'flattening' world," notes the global best-selling book "the World Is Flat". At present, with a diversity of outsourcing international services and an increasing specialization of transnational firms in the developed nations, their rear or logistic service, customer service, commercial business handling, research and development, and consultancy analysis, have been outsourced to the newly emerging nations.

With an annual pace of 30 to 40 percent to speed up, the global outsourcing market is expected to amount to 1.2 trillion US dollars this year. Authoritative agencies have forecasted that off-shore outsourcing for white collars in the United States will reach 30 percent in the next five years and, by 2010, 25 percent of their traditional IT businesses will flow to India, China and Russia. The modernization and globalization of service industry has not only fundamentally altered the development mode of global service business, but changed in an in-depth, penetrating way the growth mode of economy, industries and technologies in all nations, and determined their international competitiveness to a fairly great extent.

Service outsourcing pose an immense opportunity for China, which has attracted a host of foreign manufacturing industries to move into its territory during some 30 years of reform and opening up, spurred the shift of overseas manufacturing industries to China and made "China-made" goods increasingly popular on the world market. In the past decade, it has sustained the relatively high criteria of its information industry and the related infrastructure facilities, provided its outsourcing and off-shore management with more advantages and enabled General Electric (GE), Dell, IBM and Nokia to transfer their rear service in the Asia-Pacific region to China, which has all-round conditions for undertaking service outsourcing, a stable, healthy macro-economic situation and an infinite potential for domestic service industry with available higher-quality but low-cost human resources.

Furthermore, the added value of service outsourcing is anywhere from five to ten-fold higher that of traditional processing and manufacturing industries. With a great headway made in information technology globally, China should conform to the current development trends, spur service outsourcing orderly and turn itself into a "global office." And India's experience in this regard is worth learning from.

Thanks to a higher deposit saving rate, China now has a balance of approximately 35 trillion yuan (4.3 trillion US dollars) in deposits, and its foreign exchange reserve exceeds one trillion dollars, so the capital no longer poses a bottleneck for its economic growth. The gut issue at present is how to shift from the effort for attraction of investment to stress on the selection of investment, the investment quality, the optimization of investment mix and the solicitation of investment mode, so as to give scope to the outflow effect of overseas capital.

To date, China has only input one third of the capital it has drawn from overseas into its service sector, whereas other nations usually allocate two thirds of their foreign investment to the same sector. Judging from another perspective, with an average global service trade added value making up two thirds of GDP worldwide, the added value in China's service industry is only around 40 percent versus over 50 percent for other developing nations. A lower-degree openness constitutes one of the main causes for a sluggish growth in China's service sector, and the development of service outsourcing is precisely a major breakthrough in expanding the country's modern service industry and raising its level in the use of overseas capital. "Seizing a golden opportunity, one can attain his status by getting his things done."

The relevant government departments have made it crystal-clear that China will go on improving incentive measures, set up service outsourcing bases and cultivate relevant enterprises in an effort to boost service outsourcing business. The country will intensify measures to "prop up" spheres concerning banking, qualified personnel training, investment promotion, enterprise accreditation, public information service and intellectual property right protection. When more and more transnational firms turn to China as a leading destination for service outsourcing, the day is not distant for it to become a "global office".