Inspired by the New York Time's bestseller The World is Flat, senior officials of Wuxi, Jiangsu Province, are poised to make the city China's Bangalore.
Yang Weize, secretary of Wuxi's Party committee, reiterated the commitment to develop the city into China's leading outsourcing center at a recent seminar in Beijing, where 23 projects were signed between Wuxi and outsourcers from home and abroad.
Capitalizing on Wuxi's competitiveness in the IT industry, a majority of the projects are focused on software development, game design and digital video engineering. The cooperation also extends into other fields such as medical equipment monitoring, call centers and environmental protection.
Last September, the Wuxi Taihu Lake protection zone was approved as the national outsourcing demonstration zone jointly by the ministries of science, commerce, education and information industry.
Meanwhile, the city's government set an ambitious target to have 100 companies providing international service outsourcing and exporting software by 2010. According to the plan, each company will employ at least 2,000 staff and will have an export volume over US$30 million.
Thus the total output value of the city's outsourcing industry is expected to amount to US$3 billion by 2010. "Wuxi's target of international service outsourcing should not only be a beautiful dream. We have to figure out how to realize it," Yang says.
Services outsourcing, an important part of the modern services industry, refers to business activities in which enterprises transfer certain business processes to a third party, such as information management, financial services and research.
Compared to traditional industries, service outsourcing usually features a high technology level, larger added value, lower resource consumption, less environmental pollution and a strong employment absorption capacity.
Wuxi, one of the economic engines of the Yangtze River Delta, used to be a national base for the manufacturing industry. In 2006, its total manufacturing output value ranked sixth in China.
However, rapid economic growth brought too much pressure to the fragile ecology. In May 2007, a blue-green algae outbreak hit Taihu Lake, which cut fresh water supply to half of the 2.3 million residents in the lakeside city for a week.
After that the Wuxi government adopted service outsourcing as the city's development strategy.
"Service outsourcing was only incidentally mentioned a few years ago," says Wu Fengfeng, secretary-general of Wuxi city government. "After the algae outbreak, the government started to formally outline the goal of transforming Wuxi into a 'world office' from a 'world factory'."
Since then, the local government has shut down more than 500 heavy-polluting enterprises along the lake bank, such as chemical plants and electroplating factories, according to local officials. The closure of these factories also created room for the outsourcing industry.
"Service outsourcing was an inevitable choice for Wuxi to upgrade its industrial structure, relieve environmental pressure and eliminate the bottleneck of resources," Yang says.
In order to ensure a smooth shift in industrial structure, the Wuxi government allocated an investment of 1.5 billion yuan to boost the service outsourcing industry, offering tax rebates, favorable office rental prices and training incentives for enterprises within the sector.
Under the scheme, an outsourcing company can receive an award of as much as 10 million yuan from the city government when it has a staff size over 500 people and its annual exports exceeds US$3 million.
In 2007, the total output of the service outsourcing industry US$570 million, and the sector's exports reached US$140 million. At present, about 430 outsourcing companies have settled in Wuxi and now employ more than 20,000 staff.
As a manufacturing base, Wuxi also boasts a solid foundation for international cooperation, covering advanced industries such as electronics and IT, machinery and auto parts, bio-technology and pharmaceuticals.
By the end of 2007, more than 5,000 foreign-funded enterprises had invested in Wuxi, including 138 enterprises established by 73 Fortune 500 companies.
Once a major destination for Japanese investment, Wuxi also has advantages in undertaking outsourced services from Japan. Last year, the largest IT outsourcing enterprise in Japan set up the NEC Eastern China Outsourcing Center in Wuxi.
Following NEC's example, other Japanese companies, including OBC and NTT Data, have also started operating in the city.
Wuxi also enjoys a top grade network communications environment in China. In February, the computer giant IBM established China's first cloud computing center for software companies in an industrial science park near Taihu Lake.
The state-of-the-art technologies of IBM's cloud computing approach can offer software companies within the park the ability to tap into a virtual computing environment to support their development activities.
"This approach to computing will help them deliver innovation and pursue global market opportunities," says Ye Tianzheng, director of the IBM's China research center.
The service outsourcing industry requires an abundant talent pool. Currently, there are 17 independent universities and colleges in Wuxi. Cooperating with the Wuxi government, Peking University, one of China's best, has set up an education and research center for software engineering in the city.
"The graduates' education at the center will combine teaching courses with internship opportunities at IT companies in Wuxi," says Chen Zhong, dean of the software and microelectronics school at Peking University.
Service outsourcing training institutions such as NIIT, Asia's largest IT trainer, also initiated cooperation with Wuxi in February, aiming to identify and build the requisite IT infrastructure that will foster the region's talent pool.
(China Daily March 31, 2008)