China To Challenge India As Top Outsourcing Destination

The Chinese government has earmarked 10 cities in the country for development as major outsourcing centers in a bid to capture a greater share of the tech work that Western multinationals are farming out to India and other low-cost destinations, the official Chinese news agency Xinhua reported Tuesday.

Cities targeted by the campaign include Shanghai, Dalian, Shenzhen, and Chengdu, according to the news agency, which reported that the government wants to quadruple its outsourcing exports by 2010. China's revenue from such sales stands at about $900 million -- less than the annual sales posted by a number of individual Indian outsourcing companies.

China is hoping this latest initiative will change that. Assistant Minister of Commerce Fu Ziying said he wants to convince 100 multinationals to outsource to the country and encourage the development of 1,000 large and midsize indigenous outsourcers. Unlike India, which has seen the rise of billion-dollar outsourcing vendors like Infosys and TCS, China's outsourcing industry remains highly fragmented.

Meanwhile, Indian vendors are themselves eyeing the People's Republic as a site for expansion in order to offset rising wages and a tight labor market in India. TCS says it's looking to add about 4,000 to 5,000 tech workers to its fledgling Chinese operations over the next three to five years. The company recently sold a 10% stake in the venture to Microsoft.