Well inland in Southwest China's Sichuan province, the capital Chengdu is benefiting from a robust performance in service outsourcing. Photos Provided to China Daily

Lower costs alluring to high-tech companies

Service outsourcing is expected to make greater contributions to the economy of Chengdu after the industry was in the limelight at the Second China-India Business Forum that began on Sept 26 in the capital city of Southwest China's Sichuan province.

"This came partly as a result of the industry's rapid development in Chengdu," said a city government official, adding that the city's service outsourcing companies finished $15 million contracts from India alone last year, a 195 percent increase from 2010.

E B Rajesh, director and chief China representative of Confederation of Indian Industry, believes cooperation with India will benefit Chengdu in developing its outsourcing industry.

"India starts much earlier than Chengdu in doing service outsourcing, but the city is learning at a very fast pace," he said at the forum.

With intensive government support, Chengdu will grow into one of the global IT centers in the near future, Rajesh said.

Official statistics show that Chengdu's service outsourcing industry generated an output of 38 billion yuan ($6.04 billion) in 2011, a 26.7 percent increase over the previous year, accounting for more than 11 percent of the service industry's total output in the city.

According to a report from the Ministry of Commerce, Chengdu's offshore service outsourcing contracts hit $610 million in 2011, with completed work valued at $470 million, rising by 47 percent and 81 percent respectively, eclipsing all other cities in western China for two consecutive years.

The figures surged again by 40 percent and 74 percent in the first six months this year, according to an official of the city's bureau of commerce.

The industry's robust performance has helped make Chengdu a magnet for service outsourcing companies, the official said.

There are more than 1,000 enterprises working in the industry in Chengdu, the official said, noting that 21 of top 100 service outsourcing providers, including Accenture, IBM, and Wipro Technologies, have operations in the city.

Another major factor that appeals to service outsourcing companies is lower costs in Chengdu, according to local officials.

In addition to markedly cheaper office buildings, "we offer professionals at a much lower price," a city official told China Daily, citing a statistic from computer human resources company Kenexa that IT engineers in Chengdu demand a salary 22 percent lower than their counterparts in China's first-tier cities such as Beijing, Shanghai and Shenzhen.

Booming manufacturing and modern service industries also help attract service outsourcing enterprises by creating conditions favorable for their development, the official said.

Telecom giants Motorola, Nokia, Siemens, Huawei and ZTE all have plants or research and development centers in Chengdu, he said.

The city is also home to service centers for 13 large financial institutions, which presents great opportunities for enterprises specializing in financial outsourcing.

Other industries such as e-commerce, education and tourism are also making headway in Chengdu, creating potential outsourcing opportunities.

As service outsourcing plays an increasingly important role in Chengdu's economic development, the city government has made efforts to boost its sustainable development.

"We have been holding quarterly conferences since 2006 with foreign outsourcing service providers so that they can have face-to-face discussions with the mayor and other senior leaders of the city," said a government official.

In 2007, the city government also formulated polices to encourage development of enterprises engaged in the service outsourcing industry.

In addition, "the Chengdu government has worked hard to provide good infrastructure," the official said.

Chengdu now has six service outsourcing parks, including the 1.1 million square meter Tianfu Software Park attractive to many outsourcing enterprises due to its range of facilities.

The Western Information Center of China, which has a storage capacity of 1,000 terabytes and a core bandwidth of 1,450 gigabytes per second, also helps in the development of IT outsourcing in the city.

Chengdu also houses the largest public technical supporter in western China and the country's first commercialized cloud computing center.

In addition to service outsourcing for software and telecom companies, the Chengdu government is now planning to boost it in finance and biomedicine, said city officials.

lifusheng@chinadaily.com.cn

(China Daily 09/29/2012 page6)