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”.
1/30/2007
Outsourcers aim for the big league
India's traditional supremacy in the IT offshoring stakes is being challenged by China which plans to quadruple its outsourcing exports by 2010, according to this InformationWeek story.
software outsourcing China skillnet.gifAs EngagingChina has noted before, China is starting from a low base but growing fast. In 2007, China's software outsourcing services are predicted to reach €1.7bn according to German consultancy Skillnet-- see chart.
Nevertheless, China still has a lot to do to convince western customers and software houses that its competencies and skills are comparable with those of India.
In its latest initiative to address these issues, China hopes to convince 100 multinationals to outsource to the country and encourage the development of 1,000 large and mid-size indigenous outsourcers.
Unlike India, China's outsourcing industry remains highly fragmented and none of its indigenous outsourcers are household names in the west.
Most outsourcing experts say China's technical skills are -- or soon will be -- comparable with those of India. But there are a lot more factors that come to play in choosing an outsourcing partner and the lowest-priced bid does not always win.
TifoSoft, a Chengdu-based outsourcer, recently announced it would set up operations in Singapore, presumably in a bid to address the unease that some western customers may have about dealing with a Chinese company. Singapore is home to many multinationals and so western fims will presumably have less qualms using an outsourcing partner based on the island nation, even though the bulk of the work will be done at TifoSoft's facility in Chengdu, where labour costs are only a fifth of those in Singapore.
Also the IT outsourcing theme, ChinaTechNews has an interesting interview with Eric Rongley, CEO of Bleum, one of the first firms to spot the potential of China for offshore software development. To counter the communication problems that can occur with western clients, Bleum has an "English only" policy and provides English classes for its staff . Bleum is one of only a handful of companies in China to boast CMM Level 5 certification -- the highest quality certification.
The company was recently awarded Gold Partner certification by Microsoft in recognition of its expertise in Microsoft technologies.
software outsourcing China skillnet.gifAs EngagingChina has noted before, China is starting from a low base but growing fast. In 2007, China's software outsourcing services are predicted to reach €1.7bn according to German consultancy Skillnet-- see chart.
Nevertheless, China still has a lot to do to convince western customers and software houses that its competencies and skills are comparable with those of India.
In its latest initiative to address these issues, China hopes to convince 100 multinationals to outsource to the country and encourage the development of 1,000 large and mid-size indigenous outsourcers.
Unlike India, China's outsourcing industry remains highly fragmented and none of its indigenous outsourcers are household names in the west.
Most outsourcing experts say China's technical skills are -- or soon will be -- comparable with those of India. But there are a lot more factors that come to play in choosing an outsourcing partner and the lowest-priced bid does not always win.
TifoSoft, a Chengdu-based outsourcer, recently announced it would set up operations in Singapore, presumably in a bid to address the unease that some western customers may have about dealing with a Chinese company. Singapore is home to many multinationals and so western fims will presumably have less qualms using an outsourcing partner based on the island nation, even though the bulk of the work will be done at TifoSoft's facility in Chengdu, where labour costs are only a fifth of those in Singapore.
Also the IT outsourcing theme, ChinaTechNews has an interesting interview with Eric Rongley, CEO of Bleum, one of the first firms to spot the potential of China for offshore software development. To counter the communication problems that can occur with western clients, Bleum has an "English only" policy and provides English classes for its staff . Bleum is one of only a handful of companies in China to boast CMM Level 5 certification -- the highest quality certification.
The company was recently awarded Gold Partner certification by Microsoft in recognition of its expertise in Microsoft technologies.
The China Question: When, Not If, Will It Rival India?
For as long as we can remember, folks have been talking about China as the “next India.”
Every region of the world — from Latin America to Eastern Europe to Africa – wants to be the “next India.” Yet China seems to be the only country with the population, the skills and, perhaps most important, the drive to make it happen.
As fast as India’s outsourcing economy is growing, China’s is growing faster – 36 percent a year, according to Analysys International, which projects it will reach $4 billion by 2009.
Some executives, like the CEO of software development firm Freeborders, insist Chinese developers are more creative thinkers than their Indian counterparts. And the country’s infrastructure tends to be more reliable, at least partially due to government economy-building initiatives.
Indian firms like Tata Consultancy Services are rushing to beef up their Chinese presence. Tata, which is in a joint venture deal with Microsoft, expects to multiply its Chinese workforce by more than 10 times over the next five years, to 5,000 employees. Other major investors in China include IBM, HP and Siemens.
It’s also becoming a destination of choice for management types hoping to hone their skills and get a leg up in the global economy. A Dallas Morning News article quotes a Texas attorney who accepted a position there as saying China is “the industrial revolution in early 19th-century America all over again.”
That bit of hyperbole notwithstanding, there are, of course, challenges: cultural differences, concerns over intellectual property and, oh yeah, a Communist regime.
Some observers, like an executive quoted in this BusinessWeek article, say it will be at least a decade before China’s IT outsourcing industry will rival India’s.
Yet few seem to doubt it will happen. The question is “when” rather than “if” — a question that no other country appears ready to pose just yet.
Every region of the world — from Latin America to Eastern Europe to Africa – wants to be the “next India.” Yet China seems to be the only country with the population, the skills and, perhaps most important, the drive to make it happen.
As fast as India’s outsourcing economy is growing, China’s is growing faster – 36 percent a year, according to Analysys International, which projects it will reach $4 billion by 2009.
Some executives, like the CEO of software development firm Freeborders, insist Chinese developers are more creative thinkers than their Indian counterparts. And the country’s infrastructure tends to be more reliable, at least partially due to government economy-building initiatives.
Indian firms like Tata Consultancy Services are rushing to beef up their Chinese presence. Tata, which is in a joint venture deal with Microsoft, expects to multiply its Chinese workforce by more than 10 times over the next five years, to 5,000 employees. Other major investors in China include IBM, HP and Siemens.
It’s also becoming a destination of choice for management types hoping to hone their skills and get a leg up in the global economy. A Dallas Morning News article quotes a Texas attorney who accepted a position there as saying China is “the industrial revolution in early 19th-century America all over again.”
That bit of hyperbole notwithstanding, there are, of course, challenges: cultural differences, concerns over intellectual property and, oh yeah, a Communist regime.
Some observers, like an executive quoted in this BusinessWeek article, say it will be at least a decade before China’s IT outsourcing industry will rival India’s.
Yet few seem to doubt it will happen. The question is “when” rather than “if” — a question that no other country appears ready to pose just yet.
China, the aspiring scientific superpower
Celebrated as the inventor of development milestones such as the compass and printing, China is aspiring to become a global player in science and technology in the 21st century, casting off decades of neglect of academia and political persecution of intellectuals.
A leading British think-tank predicted this month that China is on the way to becoming a scientific superpower, thanks to the massive increase in its spending on research and a trend for scientists to return home from abroad.
"The center of gravity of innovation has started moving from the West to the East," the newly released report by the London-based Demos, "The Atlas of Ideas: Mapping the New Geography of Science", says. It goes on to warn that the pre-eminence of the United States and Europe in scientific innovation can no longer be taken for granted.
The Demos report is not the first to pinpoint China's efforts at reviving its scientific capabilities. A recent study by the Organization for Economic Cooperation and Development (OECD) claimed that in 2006 China had overtaken Japan as the world's third-largest spender on research and development (R&D) after the United States and the European Union, spending a total of US$136 billion.
The drive to implement the concept of "scientific development" has indeed become one of the tenets of China's top leadership in recent years. President Hu Jintao has called on China to transform itself into an "innovative country" by 2020. The government's target for China is to establish itself as a scientific powerhouse is 2050.
The top leadership's ambitious agenda has resonated with the public. A recent television documentary broadcast by China Central Television, The Rise of the Great Nations, received high rates of approval for showcasing innovation as a key element in creating a superpower.
"We need to undo the influence of our Confucian heritage in thinking that dutifully pursuing knowledge is everything," wrote an anonymous netizen on an Internet forum. "The examples of the US and Japan show that only by fully embracing technology and science can a country achieve great power."
Optimistic projections aside, in terms of concrete scientific achievements China's figures are less impressive. In 2005, China ranked No 10 globally in the number of international patent applications filed, according to the World Intellectual Property Organization. The same year China spent only $30 billion on R&D.
Experts believe the surge in research spending in 2006 reported by the OECD is partly tied to foreign companies moving some of their research operations to China, and to the fact that a lot of research talent and advance equipment is internationally mobile.
Chinese government officials have tried for years to persuade multinationals to invest in local research sites but these efforts have been hampered by the weakness of China's intellectual-property-protection regime. The United States has complained for years and recently threatened a World Trade Organization copyright case against Chinese companies producing illegal optical disks and computer software.
Nevertheless, government pledges to support scientific development and improve standards of intellectual-property protection have succeeded in persuading a range of multinationals, in telecommunications and computer industries in particular, to site their research centers in China. Last year many pharmaceutical multinationals such as Pfizer, Roche, Novartis and Bayer announced they were also forging ahead with research initiatives in China.
The trend of outsourcing R&D to China is expected to continue, with the country poised to become the second-largest if not the largest market for cars, mobile phones and other products.
The rising number of multinational research centers, the steady return of Chinese scientists from abroad, and the growing pool of China's own university graduates are seen as some of the factors that will determine China's emergence as a scientific superpower, according to the Demos report.
"Beijing's university district alone has as many engineers as all of Western Europe, and you can imagine how dynamic the potential is," James Wildson, co-author of the Demos report, was quoted by the official China Daily.
The Chinese leadership has unveiled plans to boost investment in scientific R&D to 900 billion yuan ($116 billion) by 2020. By then, Beijing hopes research spending will account for 2.5% of gross domestic product.
Though China's spending on R&D has increased by 20% a year since 1999, much of the research is tied to developing items for domestic consumers, not scientific breakthroughs. A few high-tech sectors such as space technology and biotechnology have benefited from high-level government support.
The Demos report warns that China's rigid institutional system and unreformed educational system could also hamper China's long-term scientific progress. China's education relies heavily on memorization and fosters little critical thinking.
A leading British think-tank predicted this month that China is on the way to becoming a scientific superpower, thanks to the massive increase in its spending on research and a trend for scientists to return home from abroad.
"The center of gravity of innovation has started moving from the West to the East," the newly released report by the London-based Demos, "The Atlas of Ideas: Mapping the New Geography of Science", says. It goes on to warn that the pre-eminence of the United States and Europe in scientific innovation can no longer be taken for granted.
The Demos report is not the first to pinpoint China's efforts at reviving its scientific capabilities. A recent study by the Organization for Economic Cooperation and Development (OECD) claimed that in 2006 China had overtaken Japan as the world's third-largest spender on research and development (R&D) after the United States and the European Union, spending a total of US$136 billion.
The drive to implement the concept of "scientific development" has indeed become one of the tenets of China's top leadership in recent years. President Hu Jintao has called on China to transform itself into an "innovative country" by 2020. The government's target for China is to establish itself as a scientific powerhouse is 2050.
The top leadership's ambitious agenda has resonated with the public. A recent television documentary broadcast by China Central Television, The Rise of the Great Nations, received high rates of approval for showcasing innovation as a key element in creating a superpower.
"We need to undo the influence of our Confucian heritage in thinking that dutifully pursuing knowledge is everything," wrote an anonymous netizen on an Internet forum. "The examples of the US and Japan show that only by fully embracing technology and science can a country achieve great power."
Optimistic projections aside, in terms of concrete scientific achievements China's figures are less impressive. In 2005, China ranked No 10 globally in the number of international patent applications filed, according to the World Intellectual Property Organization. The same year China spent only $30 billion on R&D.
Experts believe the surge in research spending in 2006 reported by the OECD is partly tied to foreign companies moving some of their research operations to China, and to the fact that a lot of research talent and advance equipment is internationally mobile.
Chinese government officials have tried for years to persuade multinationals to invest in local research sites but these efforts have been hampered by the weakness of China's intellectual-property-protection regime. The United States has complained for years and recently threatened a World Trade Organization copyright case against Chinese companies producing illegal optical disks and computer software.
Nevertheless, government pledges to support scientific development and improve standards of intellectual-property protection have succeeded in persuading a range of multinationals, in telecommunications and computer industries in particular, to site their research centers in China. Last year many pharmaceutical multinationals such as Pfizer, Roche, Novartis and Bayer announced they were also forging ahead with research initiatives in China.
The trend of outsourcing R&D to China is expected to continue, with the country poised to become the second-largest if not the largest market for cars, mobile phones and other products.
The rising number of multinational research centers, the steady return of Chinese scientists from abroad, and the growing pool of China's own university graduates are seen as some of the factors that will determine China's emergence as a scientific superpower, according to the Demos report.
"Beijing's university district alone has as many engineers as all of Western Europe, and you can imagine how dynamic the potential is," James Wildson, co-author of the Demos report, was quoted by the official China Daily.
The Chinese leadership has unveiled plans to boost investment in scientific R&D to 900 billion yuan ($116 billion) by 2020. By then, Beijing hopes research spending will account for 2.5% of gross domestic product.
Though China's spending on R&D has increased by 20% a year since 1999, much of the research is tied to developing items for domestic consumers, not scientific breakthroughs. A few high-tech sectors such as space technology and biotechnology have benefited from high-level government support.
The Demos report warns that China's rigid institutional system and unreformed educational system could also hamper China's long-term scientific progress. China's education relies heavily on memorization and fosters little critical thinking.
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