Although the economic downturn has affected China’s outsourcing industry in the past year, recent economic indicators signal that it continues to develop rapidly. According to the Ministry of Commerce, by the end of 2009 outsourcing enterprises totaled 8,060 and conducted over US $14 billion worth of contracts. The International Data Corporation (IDC) predicts that China’s outsourcing call centers alone will reach US $1.7 billion by 2013. Nonetheless, outsourcing in China lags significantly behind that of India, the world’s leader in the area. According to a study by McKinsey, fragmentation of China’s outsourcing market, and notably that of software outsourcing, has proved a limitation in the past. Other issues for foreign companies include lack of English proficiency and IP concerns.
New research, however, indicates positive trends in this industry. China’s IT infrastructure and call center capacity have improved significantly in the past year. Furthermore, several national policies passed in 2009 encourage foreign involvement in the area, particularly for hi-tech companies. Specifically, these implement tax breaks, subsidies, training support, favorable interest rates, and various other initiatives to stimulate the growing sector. Because of the focus on hi-tech companies, the government particularly strives to attract foreign companies with advanced experience. Another important recent change has been the shift toward second-tier cities for outsourcing services. Although major Chinese cities such as Beijing, Shanghai and Guangzhou remain central players in the market, rising salaries, in addition to the rapid development of Tier 2 cities, have made these areas increasingly appealing for those in the outsourcing industry as a whole.
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