WHY CHINA? WHY NOW?

WHY CHINA?
WHY NOW?
Why China is becoming an increasingly attractive destination for BPO services
CHINA’S ECONOMY HAS SUSTAINED GROWTH DURING THE GFC
The UK, Europe and USA are still struggling with the global financial crisis,
characterised by:
• low GDP growth
• excess liquidity and
• high volatility in finance markets, and
• a crisis in European sovereign debt.
China’s economy has been affected far less.
12.0
10.7
10.0
8.0
9.8
6.8
5.0
6.0
3.1
4.0
2.0
USA
0.4
China
0.0
-2.0
-4.0
UK
-0.5
-2.0
Q1 2009
Q1 2010
Q1 2011
-6.0
-8.0
-6.8
% GDP growth
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CHINA OFFERS HIGHER SHARE GROWTH POTENTIAL
Shareholders demand growth in company value, even in tough economic
times.
Companies in poor performing western economies are looking to operate in
high growth markets, where their financial performance could be improved.
We have been approached by several companies in the last 6 months to
assist them to find partners in China through which to grow their
businesses. I am introducing western companies for:
• joint venture partnerships
• distribution channel partnerships
• supplier agreements
• direct entry BPO investments
This shows an increasing external demand for China as an attractive growth
market.
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CHINA’S WTO POLICIES ARE A CATALYST FOR TRANSFORMATIONAL CHANGE
China’s entry into WTO in September 2001 has been the catalyst for an
extraordinary number of initiatives: legislative changes, social changes and
infrastructure changes.
One example is that China’s top 47 banks have been opened up to foreign
investors. Now international banks can own up to 25% of those Chinese banks.
China has encouraged this investment as a means of introducing WTOcompliant banking practices rapidly into China’s banking system. This is driving
significant changes to the way financial services business is undertaken in China.
One example has been the introduction of credit cards into China’s population
since the founding of the State Credit Bureau in 2003.
• High-tech BPO applications are used to process credit card applications
• Sophisticated credit scoring analytics are used to manage risk
• Payment systems like Ali-pay, 99-Bill, SmartPay & Lakala have evolved to
accommodate hybrid card payments that combine traditional Chinese payment
customs with leading edge online systems.
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CHINA’S DRIVE TOWARDS A SERVICES-BASED ECONOMY
China has succeeded as the world’s strong outsourced manufacturing base,
providing high volume, high quality, low cost outsourced manufacturing
As transportation and logistics infrastructure becomes increasingly
sophisticated, China’s western and outlying provinces, with their abundant
populations of lower cost labour are attracting these services away from the
Eastern seaboard.
MOFCOM has invested trillions of RMB into 21 model cities, to transform
them from their traditional manufacturing bases to strong services-based
economies. High tech parks are proliferating, often with other government
involvement (e.g. Singapore and Hong Kong)
In combination with customised education courses, methodical talent
development programmes and the systematic direction of university
graduates into services occupations, a thriving industry in ITO, BPO and KPO
is transforming these cities.
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LESSONS FROM OFFSHORE APPLIED TO ONSHORE
The early stages of the service economy focused on offshoring – leveraging low cost
labour in China to attract foreign work to be undertaken in China.
Chinese students in western universities (UK, USA, Australia, NZ) have returned to
establish companies that bring digitised BPO applications from foreign companies.
Over 10 years Chinese BPO service providers have built their scale, matured their
business models, refined their operating platforms, attained ISO and CMMI
accreditations, and become world class.
Now the stars are starting to align, and these pieces of the puzzle are beginning to
reveal a new picture, combining:
• the skills & process capabilities learned from serving offshore BPO markets,
• the knowledge of western banking practices learned through international
investment in China’s banks,
• The growing confidence of China’s largest corporations in its ITO & BPO services
industry
• Government policies driving government institutions to outsource non-core
processes to stimulate the transformation of the services economy.
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CHINA BURGEONING DOMESTIC MARKET FOR ITO, KPO & BPO
In consequence China is now seeing the emergence of a very strong outsourced
services sector serving its domestic market.
In ITO, this phenomenon is also driving demand for double-byte character
(Chinese language) operating systems, workflow platforms, new customer
application development and the localisation (translation) of USA and European
software programmes.
This strong growth potential is attracting venture capitalists to invest in strong
local BPO companies, e.g.:
• China Data Group: (Beijing, Kunshan etc.)
• M&Y Global Services: (Daqing, Zhuhai, Shanghai, Beijing & Cardiff & London UK)
• CompuPacific (Beijing, Xi ‘An and Michigan USA)
These companies are poised to capitalise on what is thought to be the
blossoming of China’s ITO, BPO & KPO industry on a scale that only China’s 1.3
billion people could offer.
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CHINA CREATES NEW INDUSTRIES TO ACCELERATE GROWTH
On 13th March 2011 Colliers International in the Philippines reported that
growth in the BPO sector is driving unprecedented growth in the real estate
sector.
China has invested heavily in 21 BPO cities. The growth in China’s BPO sector
will outstrip that of the Philippines.
China has changed its laws around the leasing of land from the state. It is now
possible to take 70 year leases. This is similar to Crown leases in UK, Torrens
title as used in several USA and Australian states.
On 16th March 2007 China also changed its laws, permitting the private
ownership of property sitting on the land. This has opened up the scope for a
new industry in property transaction management.
Here in Hangzhou, the government of Zhejiang province sent 20 executives from
the Ministry of Land & Resources to Australia, in December 2010, for training in
advanced property registry management practices.
The growth in BPO-related real estate and property transaction management
services experienced in the Philippines could soon be seen in China.
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Practical Logic works with:
• large western corporations and government agencies;
• large Chinese corporations and government agencies; and
• Chinese BPO service providers
to build bridges between them.
THANK YOU
We introduce organisations to each other domestically and internationally.
We do the research, planning and business development that make these relationships work.
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