2009-02-04

China Aims Incentives at Outsourcing Industry

China is targeting a series of tax breaks and incentives in designated pilot cities to encourage its outsourcing industry.

Giving a helping hand to outsourcing firms could also support Beijing's goals of maintaining employment, particularly for college graduates, as an economic slowdown cuts into their job prospects.

The low skill level of Chinese college graduates and concerns over intellectual property are two of the main factors holding back China's industry, which despite annual growth of 20 percent in recent years is falling behind in global market share, Alex Peng, a partner at McKinsey & Co in Beijing, said on Tuesday.

Chinese firms are generally reluctant to transfer service operations to outside providers, Peng said, due in part to the fact that they can hire workers for the same wages as the Chinese outsourcing firms can.

China accounts for just fewer than 10 percent of the global outsourcing industry.

China will offer service outsourcing companies a subsidy of up to 4,500 yuan ($657.5) a year for every college graduate employed on a contract of at least one year, Xinhua said, and develop a "network of trained outsourcing personnel."

The document drafted by the Ministry of Commerce and approved by the State Council, or cabinet, designated 20 cities, including Beijing, Shanghai, Xi'an, Suzhou and Hangzhou, for tax breaks, financial support, subsidies and intellectual property rights protection.

Advanced technology companies are allowed to adopt flexible working hours for employees, and are granted favorable tax policies to companies in central and western China that apply for loans.

It also encouraged telecom providers to provide favorable rates for companies communicating with their outsourcer.

"More foreign companies outsource parts of their business to overseas companies to reduce operation costs, which provide Chinese enterprises with lots of opportunities," Xinhua cited vice minister of commerce Ma Xiuhong as saying. Ma estimated that international service outsourcing volume would top $600 billion by 2010.

The Ministry targets training for 1.2 million service outsourcing professionals by 2013, and estimates the sector will employ 1 million new college graduates during that time.

As of 2008, 3,300 Chinese companies provided service outsourcing business to overseas companies, with a contract volume of $4.69 billion, Xinhua said.

Source:http://hfsourcing.gov.cn/en/NewsInfo/view.do?method=view&id=5101&m_name=
Outsourcing%20News%20of%20China

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