Chinese outsourcing market dominated by foreign competition

The Chinese government has made large investments in outsourcing facilities

The growing outsourcing market in China is not having the effect that the Chinese government had hoped for, according to a new report by Ovum.

The Chinese government has set up 20 cities for outsourcing activities, and made large investments in infrastructure, education, training and tax incentives in an attempt to grow business.

However, Ovum senior analyst Patrick O'Brien explained in a report that the Chinese outsourcing market is being dominated by foreign players, such as BT, setting up their own Chinese subsidiaries.

"The Chinese government is taking measures to build China as a service-based economy, but there are no signs of a Chinese equivalent of a Tata Consultancy Services or an Infosys emerging, capable of challenging the major Western vendors for the foreseeable future," he said.

"Western providers have invested in Chinese delivery centres having learned their lesson from the procrastination many showed when India emerged, which effectively allowed India's domestic vendors to build themselves into global players."

Part of the problem is that, while many Chinese outsourcing companies are state-owned, the Chinese government is not signing deals with them.

Another problem is China's poor marketing skills in advertising for new market opportunities. This has been made worse by two government departments trying to promote outsourcing: the Ministry of Commerce and the Ministry of Industry and Information Technology.