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China has brought out a set of policy measures to help the growth of outsourcing industries as the government felt that the existing growth model, which has been in place for the past 30 years, needed to be revamped. The old model of manufacturing and exporting to consumers in the developed economies, China feels, is not working for them anymore. They feel the economy needs to be reorganized and restructured with emphasis on domestic consumption and look into newer areas for growth,[link widoczny dla zalogowanych], which includes outsourcing of software and back-office services.
China's aim is to hasten the growth of the outsourcing industry in an effort to take on India, which is at present the undisputed leader when it comes to providing outsourcing services. Towards this end, the commerce ministry signed a memorandum this week with 22 leading multinational corporations which include Coca-Cola, Sony and Kodak. They hope to attract 200 more multinational companies from Fortune 500 companies to outsource to China by 2013.
The deputy chief of the foreign investment department, Lin Zheying at China's commerce ministry, says that the government has taken up an initiative of hosting preferential policies to give a boost to the growth of the outsourcing industry since the beginning of this year. One of the policies China has initiated is that of offering financial aid to companies.
The government pledged support from financial institutions in the form of equity and debt financing to Chinese outsourcing service providers as part of this new policy. Banks have been advised to think of ground-breaking credit products which are aimed at the outsourcing business especially for companies in 20 "pilot cities" which include Beijing, Shangai,[link widoczny dla zalogowanych], Tianjin and Chongqing.
Other service providers who meet the criteria have also been promised support to get themselves listed on domestic and overseas stock exchanges. Policy makers from banks and insurance companies also issued guidelines inviting social funds, venture capitalists and equity funds to help the growth of the outsourcing industry with credit and equity investments.
A researcher, Wu Jinglian, at the Development Research Centre of the State Council says that China has the capability to beat India when it comes to outsourcing. Reports from the Global Outsourcing Report, which ranks countries based on their opportunities,[link widoczny dla zalogowanych], costs and risks in relation to IT outsourcing, say that China, now in second place,[link widoczny dla zalogowanych], will take over the No.1 slot from India by 2015.
China's soaring ambitions are backed by good planning. The government's current Five-Year Plan is geared to encourage a 1000 large and medium-sized service outsourcing ventures. At last count in June, China had more than 6,600 outsourcing service providers with over 1.2 million employees. With the government wanting a growth of $30 billion by 2013, deputy chief Lin believes that the new preferential policies which include tax incentives,[link widoczny dla zalogowanych], employment subsidies and a labor management system can help service providers and eventually help the government meet its target.