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What is the China sourcing environment?

China’s government has embraced the notion that developing services capabilities offers significant economic benefits consistent with its Harmonious Society objectives. The need to promote its services industry is all the more urgent for China because portions of its current manufacturing base will almost certainly be eliminated by the nation’s transition to an acceptable, ecologically responsible production environment. The result has been a trend away from the PRC’s traditional dominant manufacturing focus, evidenced by a steady reduction of officially sanctioned trade incentives over the past five years and by an increasing emphasis on higher-end production and processes, including services.

With a clear eye toward India's success in its outsourcing services industry, the Chinese government has designated a number of cities as "Outsourcing Services Base Cities,"2 where it is concentrating infrastructure developments and incentives. The government has further adopted incentives — including tax incentives and liberalized work-out systems — to promote the development of services companies.  These and similar efforts reflect China’s drive to encourage multinational companies to shift offshore outsourcing services to the PRC. In addition, the Chinese government is working to promote the development of large and mid-size service outsourcing enterprises, with a particular focus on software and technology-related service providers. A number of China’s regional and municipal governments, moreover, have acted independently to implement programs that will stimulate service-industry development in their areas in an effort to promote the Harmonious Society objectives.


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