Total Contract Amount of Wuxi Service Outsourcing Industry in Jan-Aug Amounts $7.5 Billion
Source: Financial Report of the 21st Century View: 245 Date: 2014-09-19

According to the latest data released by Wuxi Commerce Bureau, total contract amount in service outsourcing amounted $7.5 billion, 27.8% higher than that of last year; $6.3 billion was executed, 29% higher than that of last year; total contract amount in offshore service outsourcing is $5.03 billion, 31.2% higher than that of last year; $4.12 billion was executed, 28.2% higher than that of last year.

"Service outsourcing is an inevitable choice for Wuxi’s development, and Wuxi’s top priorities are to progress, to innovate and to better.” said Ji Kejian, deputy mayor of Wuxi, when interviewed.

According to the latest data released by Wuxi Commerce Bureau, total contract amount in service outsourcing amounted $7.5 billion, 27.8% higher than that of last year; $6.3 billion was executed, 29% higher than that of last year; total contract amount in offshore service outsourcing is $5.03 billion, 31.2% higher than that of last year; $4.12 billion was executed, 28.2% higher than that of last year.

Wang Xing, the deputy director general of Wuxi Commerce Bureau, said that Wuxi has always been among one of the top service outsourcing cities in terms of all key performance indicators. The industrial growth rate is generally over 30% and despite of the bad international contest, growth rate in Jan.-Aug., with no significant decrease, is 27.8%.

Problems like small enterprise scale and talent bottleneck still remain to be solved in spite of Wuxi’s achievement in service outsourcing.

Get Connected to Free Trade Zone

Wuxi was selected as one of the Top20 Service Outsourcing Demonstration Cities in China back in 2009 which was one of its many advantages.

Mr.Wang said Wuxi is one the demonstration cities offering most preferential policies and substantial support to outsourcing enterprises. In addition to advantages in locality and talents, Wuxi also has an edge in policies, the city formulated a “123 Plan” for the service outsourcing industry and was the first to jointly offer satisfactory enterprises fund in accordance with state supporting policies on a one-to-two proportion (the city pays half of the amount the central government offers). Wuxi also set a special fund for outsourcing personnel training.

Up till now, 30 enterprises listed in the Top100 global outsourcing enterprises and Top50 in China, 9 of the Top10 leading outsourcing companies have set regional headquarters or global delivery centers in Wuxi.

Growth rate in Jan.-Aug. ,however, saw a slight decline to 27.8% which was set to be 35% at the beginning of 2014 due to fluctuating exchange rate, establishment of Free Trade Zone, decrease in government subsidy and less stronger willingness and confidence in exploring global markets.

In respond to this decline, Wei Jianguo, the Secretary General of China Center for International Economic Exchanges, said that the mainstream ideologies are to focus on platform economics and that regional integration is more important than separate development. Local outsourcing enterprises need to cooperate with each other for regional integration so to achievea whole greater than the sum of the parts.

Wuxi set up a fund of 5 million RMB and has to date raised 20 million RMB from society for innovation incubators and innovative projects.

Mr.Wang said Wuxi was working on how to introduce local outsourcing enterprises into Free Trade Zone.

Sun Keqiang, head of Jiangsu Academy of Economic Strategy, Provincial Academy of Social Science, said service outsourcing covered many aspects and all the southern regions of Jiangsu was making great effort to transform and upgrade.

Talent Bottleneck

In fact, the local service outsourcing industry witnessed not only fast development but difficulties as well.

According to Wuxi Commerce Bureau, Wuxi outsourcing will have achieved a $30-billion total contract amount by 2020 but the whole industry is still in its start-up and confronted with challenges like small developing scale, high operating cost, weak risk resistance capability, and short talent supply.

In light of industrial practitioners, there are mainly three difficulties standing between the industry and a sustainable, strong development:

1.     Hard to get first-hand orders due to small company scale and weak competence

2.     Short in talents because of fierce competence in the talent market

3.     Increasing cost and low government subsidies

Talent bottleneck brings huge pressure: insufficient local universities and colleges can’t meet the talent demand, training nonlocal people results in high training cost, the talent demand gap is ever widening, especially in high and medium-ranking talent

Wuxi has held the College Service Outsourcing Innovation and Business Plan Competition for 5 years to find people suitable for future technical directors, project managers, systems architects,bridge system engineers, quality surveillance managers etc, revealed by Commerce Bureau.

In fact, service outsourcing enterprises in Wuxi or even in China lose their cost edge when competing with counterparts in India and other countries due to increasing cost in human resource. It even reduces their developing pace.

To solve current problem, Wuxi will keep on promoting service outsourcing enterprises and make more efforts to organize outsourcing business through the “123 Plan”. Next, Wuxi will do more homework and gather suggestions from enterprises in preparation for upcoming supportive policies and key priorities of next year and the year following.

Devott Publications
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