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The government is poised to prioritize service outsourcing in the coming years, in a bid to boost service industries, according to Ministry of Commerce officials.

"The government will establish specific policies to encourage service outsourcing in China," said Li Zhiqun, director of the ministry's department of foreign investment administration.

He said the ministry would consult with related ministries to have outsourcing listed as one of the industries in which investment is most encouraged.

The government will also provide enterprises with financial support, such as low-interest loans for qualified projects and insurance of credit for large-scale offshore projects.

"We will also help enterprises solve the problem of talent supply," said Li.

He added that service outsourcing enterprises purchasing services provided by a third party in order to complete their own internal work is an emerging way of attracting foreign investment.

The Ministry of Commerce will launch a project with an annual budget of at least 100 million yuan (US$12.5 million), to set up 10 bases for service outsourcing over the coming three to five years.

The ministry hopes to persuade 100 multinational corporations to transfer their partial outsourcing businesses to China, as well as creating 1,000 large-scale international service outsourcing enterprises.

Li said the ministry would particularly focus on 10 enterprises with over 10,000 employees, which will carry out international service outsourcing.

He said he expects China will focus on attracting multinationals to establish subsidiaries and joint ventures in the country, which he believes will help improve domestic outsourcing services.

"We also have to develop the domestic outsourcing market because the huge potential in the domestic market means China has a unique advantage in developing the service outsourcing industry," he said.

The global outsourcing market is expected to hit US$1 trillion by 2008, and so far China lags behind India in the sector.

However, China hopes to become the main international outsourcing service base within the next five to 10 years, predicted Wang Bo, vice-president of Accenture's Asia Pacific branch.

He said China has good communication and transport infrastructures in many cities, from the largest ones down to second- and third-tier cities, in comparison to India.

(China Daily July 27, 2006)