Global Times - Outsourcing on the rise

Outsourcing on the rise

Source: Global Times
[01:10 November 12 2009]
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Employees on a production line at the Celestica Technology, a Canada-based electronics company, in Dongguan, Guangdong Province. IT outsourcing to China is on the rise. Photo: CFP

By Sun Zhe

Foreign countries have started outsourcing to China again after a brief slowdown last year.

The first nine months of the year saw 3,287 new enterprises providing services that have been outsourced to China launched, offering 585,000 new jobs. International service contracts won by Chinese enterprises in the first nine months are valued at $12.7 billion, up 212 percent from the same period last year, according to Ministry of Commerce (MOFCOM) figures released Tuesday.

As of the end of September, there were 8,060 enterprises with 1.4 million employees operating in the outsourcing industry.

India, however, still remains the most attractive destination for outsourcing due to its large English-speaking population and skilled IT professionals. And outsourcing to China is still relatively new, as Japanese and Western companies only began a major push into the country around five years ago, said an industry insider who declined to be named.

Outsourcing is likely to increase despite the economic crisis because it allows companies in developed countries to cut costs, said a report released late October by the United Nations Conference on Trade and Development.

China is projected to win contracts worth $30 billion in 2013, with annual growth of 43 percent, adding 1.2 million new jobs, said MOFCOM.

Reuters reported that salaries in India have been rising by about 15 percent annually. This could play to China's advantage as the country pumps out more IT experts.

Around 400 thousand IT majors graduate every year, according to the Ministry of Education.

But even if India's dominance wanes, China still faces challenges from eager newcomers.

Southeast Asian countries and Ireland are proving fierce competitors because they are trying to undercut China in labor costs, said Zhang Huang, a project manager with the Beijing-based outsourcing business arm of PCCW, a Hong Kong IT and telecom giant.