China's service outsourcing industry takes off | KPMG | CN
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China's service outsourcing industry takes off, according to a KPMG report

China's service outsourcing industry takes off


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KPMG in China


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Over recent years, there has been an increased focus on China's emergence as an important and successful outsourcing market. According to the Ministry of Commerce of China, 60,247 service outsourcing contracts were signed in 2009, a year-on-year increase of 142.6 percent. The contract reached USD 20 billion, an increase of 185.6 percent, and the contract value of offshore outsourcing reached USD 14.8 billion, an increase of 153.9 percent. 

Since February 2009, China's State Council has designated 21 "Service Outsourcing Model Cities". These cities have adopted policy measures to promote the local service outsourcing development and will gradually become the country's major base for global outsourcing activities.  

However, making strategic decisions to identify and select an optimum location for outsourcing in China can be challenging as every city has its own unique offerings.  

Last year, KPMG China issued their first China outsourcing report entitled "A New Dawn: China's Emerging Role in Global Outsourcing". This second report, "Inside the Dragon: Outsourcing destinations in China" examines 24 key outsourcing cities in China (three additional potential cities have been included in this report), highlighting the breadth of locations available for outsourcing service buyers and providers. The objective of this report is to provide reference materials to companies interested in China's outsourcing industry.  

Edge Zarrella, Global Head, IT Advisory, KPMG China said, "With the service outsourcing industry in China growing at a rapid pace, establishing a physical presence in China is imperative for outsourcing enterprises. While these cities may have similar advantages in terms of industrial policies and infrastructure, focus and potential may vary from one city to another. As such, companies need to weigh their own development requirements and strategies to determine which cities best suit their needs."  

As Ning Wright, Partner in Charge, China Sourcing Advisory, KPMG China explained, "The service outsourcing industry is a fairly new business model concept in China and it's very pleasing to see that the Chinese government has given its full support to the industry. However, companies need to note that choosing an appropriate destination is only the first challenge. A comprehensive plan needs to be established to ensure that all opportunities and advantages offered by the location are optimally leveraged; they also need to implement any strategies, which mitigate risk."  

Some of the initiatives and support measures that the Government has implemented to expedite the development of China's outsourcing service industry include: 

  • Offering a relative cost advantage compared to other developed outsourcing markets outside of China
  • Providing abundant workforce availability in these cities 
  • Providing a developed infrastructure with USD 586 billion in ports, highways, airports and power plants, as well as a modernised telecommunications network with a high-speed broadband connection ensured in major service outsourcing cities 
  • The "1,000-100-10 Project"*  

The cities in this KPMG China's report cover the following four regions: Northern China region around the Bohai area, Eastern China region around the Yangtze River Delta, Southern China region around the Pearl River Delta and Midwestern China region.


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Notes to the editors 

*The "1,000-100-10 Project", led by the Ministry of Commerce (MOFCOM), aims to establish 10 Chinese cities as outsourcing bases, attract 100 international corporate customers to offshore in these cities, and assist in the development of 1,000 large and medium-sized outsourcing vendors that can meet the demands of multinational customers. These cities enjoy support from China's central government in macroeconomic policies, planning, investment, coordination and other related aspects. In addition, special-purpose funds are earmarked by the government for the construction of public information platforms, the development of human resources, and the improvement of infrastructure and investment environments in these cities. 


About KPMG 

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International") a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

KPMG China has 12 offices (including KPMG Advisory (China) Limited) in Beijing, Shenyang, Qingdao, Shanghai, Nanjing, Chengdu, Hangzhou, Guangzhou, Fuzhou, Shenzhen, Hong Kong and Macau, with more than 9,000 professionals.

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