China’s Service Outsourcing “Twelfth-five Year Plan”: Speed up the transformation of economic development; expanding domestic market; promote services to international standard.
Service outsourcing industry is important opportunity for economic globalization. The industry has close relationship with global economic situation changes. China’s service outsourcing industry passed a rapid growth period in short. Later on, the industry faces baptism of the global economic crisis. There are some words to limited offshore outsourcing during the period of U.S. election. Appreciation of RMB reduces the cost advantages. That caused the sharp drop of profits of outsourcing enterprises’ profit. China’s offshore outsourcing faces another serious hit by recent earthquake and tsunami in Japan. Japan is an important market of China’s outsourcing industry. Japan is the most important buyer in Asia-Pacific. The weakness of demand of this important buyer gives negative impacts on development of China’s service outsourcing industry. We are going to think about the way out of China’s outsourcing industry by several negative factors.
Although crisis hit the industry, we still can see the growth in China’s service outsourcing development. In statitics, the scale of China’s service outsourcing industry is RMB 270 billion in 2010, up 35%, where domestic market takes 86.6% shares. We can see the support of China’s outsourcing industry speed up expanding of domestic market. This situation seems contradiction with China named global vendor. China’s domestic demand releases follows the strong trend of service outsourcing industry by Devott analyzed. In 2009, China’s domestic market capacity of buyers is USD 60-70 billion; released demand is USD 6-7 billion; the growth rate is 20%. In 2015, China’s domestic market will rise to USD 28-32 billion. Base on the enlargement of China’s market, especially consumption market, more and more multi-national enterprises choose outsource to China. In long run, there is still a very large potential market for outsourcing in China. In statistics, China’s leading enterprises’ businesses from domestic buyers are increased 19% in 2009. On the other hand, companies as IBM, Accenture undertook many domestic contracts. Those above show the growing up of buying demand domestically.
The release of China’s service outsourcing domestic demand has close relationship with government promoting. From “Thousand, Hundred, Ten” Project, China’s government leads the development of service outsourcing industry. Government supports on taxation, training, financial supports are incomparable with other countries such as India. To keep the development differentiation and sustainable industrial development, government proposed “Twelfth-five Year” Plan (Draft). The Plan is basing on the huge potential and unique advantage of China’s market. The Plan points out the transformation of economic development enlarge domestic market, improve the industrial standard. Devott thought the huge domestic marketing opportunities together with support of China’s government; China’s service outsourcing industry is turning fundamentally in Twelfth-five Year. The trend is going to turn from offshore to onshore, vendor to buyer. Domestic demand is the most important in next step development. China is turning from the traditional single vendor country to the largest buyer country in Asia-Pacific.
View from the entire picture, current service outsourcing businesses in China are from finance, telecommunication, and government. Financial and telecommunication industries are generally monopoly in China. Those industries are focused by outsourcing providers widely with their strong qualification. Government as the leader and pioneer in outsourcing industry, they are trying to offer contract in practice. Trend of government contracting is gradually strengthening. Devott thought, outsourcing industry is turning into “Red Ocean”, growth will slow down. The competition is getting serious in sectors of financial, telecommunication, and government, although they take large share of domestic market. Devott thought manufacturing industry is the foundation of China’s economy, which releases the larger outsourcing demand. Other infant industries as pharmaceutical and e-commerce outsourcing are opening a Blue Ocean market for domestic market in China.
Financial crisis hit economy but also promote the integration of global resources. China gets much attention from multinational enterprises. Currently, China is comparable with India, become one of important service providing countries. In the same picture of view, China has huge domestic market, which can become the largest service buyer country. We believe that China’s outsourcing industry will keep rapid growth in future, and develop a unique way for China only with the dual advantages we have.
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