Moving up the value chain

China Architecture Design and Research Group, the country's largest State-owned engineering design and service company, was contracted to design Algeria's largest new sports stadium, currently under construction in the coastal city of Oran.

China's service outsourcing sector is dominated by information technology outsourcing, which accounts for 60 percent of the total.

Much of the offshore service outsourcing demand is coming from the United States, Europe and Japan, say experts.

Figures suggest that within the next five years, China's ITO demand will increase by 38 percent year-on-year, with a annual value of more than $8 billion.

However, experts also warn that too many of China's service outsourcing providers are still too small, and as a result can target only low value projects, because of a lack of R&D investment.

Li Tinghui, a researcher at Chinese Service Outsourcing Center, said that for the industry to continue growing, Chinese outsourcing providers should work on developing more international links.

Global service outsourcing will experience the greatest demand from ITO and BPO, and that's certainly to the advantage of Chinese companies, he said.

At the end of July, 18,977 service outsourcing companies were registered in China, employing 3.72 million people, according to the Chinese service outsourcing development report.

It said that in the future, the biggest service outsourcing demand will still come from North America, Western Europe and Japan, and emerging economies, including China, India, Russia and the Philippines, will remain the major providers, among which competition will remain fierce.

But China's domestic service outsourcing market also offers huge business opportunities for local providers.

According to the Chinese service outsourcing center, potential local outsourcing market demand could be as much as four times that of the offshore market.

China's huge domestic service outsourcing market is ready to be developed, said Wang Lianpo, deputy director of the Service and Trade Bureau at the Ministry of Commerce.

As China's State-owned enterprises work on further overseas expansion, there will be huge demand for consulting, legal and financial services, and the State-owned Assets Supervision and Administration Commission said earlier this year that it will be working to cooperate with service providers on these kind of contracts in the future.

According to the 12th Five-Year Plan (2011-15), the country plans to increase the service industry's proportion of GDP from 43 percent to 47 percent.

The development of the service outsourcing industry will help with the country's overall industrial upgrade, developing modern, high-end services, and strategic industries - these will be the pillars of China's economic growth in the future, said Commerce Minister Chen Deming.

baochang@chinadaily.com.cn

Outsourcing terminology