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Outsourcing In China

By Sam Orton ·
Although India is the first destination which the multinational companies consider to outsource their projects, companies such as Microsoft and IBM have been outsourcing their projects to China, not because of being the cost-leader, but also with the endeavor of beating the country's huge market.

When China showed up itself in the outsourcing industry, many realized how its massive market of more than 1.3 billion consumers would impact the biggest manufacturers and retailers in the world. Since then China's outsourcing industry has grown up enormously at 30% per annum which have caused many countries to relocate their headquarters in China to establish businesses. According to a report from Yu Guangzhou, Vice Minister of the Ministry of Commerce in China, the software industry in China has developed speedily, with an average annual growth of 30% per year since 2001. The McKinsey report stated that around 90% of China's IT services work is carried out locally, which accounted for $6 billion (almost half of India's total revenues) in 2003. In comparison, just 30% of India's IT services are conducted locally.

Companies like Microsoft and IBM have long been customers of one of the leading outsourcing firms in China. The vice president of an outsourcing firm in China, Ken Schulz said in an interview, "But continuing to rely on low-cost labor to attract business is becoming outdated". He further said, "Facing rising labor wages and increased competition, Chinese IT outsourcing firms intend to provide more that just cost savings for their customers".

In contrast, China has always been condemned for sloppy data protection by most of the outsourcing companies throughout the globe. But, the government's new proposal for data security is seeking to overcome the matter. The guidelines established under the new proposal are aimed at protecting the privacy of Chinese citizens and provide guidance for offshore businesses operating in the country.

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