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2014 Business Review XX: Service Outsourcing Industry Witnesses Transformation and Development Adapting to Economic New Normal

Under the background that China鈥檚 economy entered into the new normal, new technologies, commercial formats and business modes in the service outsourcing industry sprung up, the role of innovation in development was even more important and individualized and diversified demands became the main stream and intelligent and specialized service became the new feature of the industry. China鈥檚 service outsourcing industry adapted itself to the new normal actively, transforming from rapid expansion of scale to mutual development of both quantity and quality.

I. Service outsourcing industry gained obvious achievements with innovation-driven transformation and development.

1. Contract volume of service outsourcing exceeded US% 100 billion for the first time. In 2014, the service outsourcing contracts undertaken by Chinese enterprises reached US$ 107.21 billion, and the executed amount reached US$ 81.34 billion, up 12.2% and 27.4% year on year respectively. Among that, the offshore contracts reached US$ 71.83 billion, with the executed amount standing at US$ 55.92 billion, up 15.2% and 23.1% year on year respectively.

2. More than 4 million college graduates were employed in the service outsourcing industry. In 2014, the number of new added employees in service outsourcing enterprises was 711,000, with 488,000 college graduates (including junior college), accounting for 6.7% of the total college graduates. By the end of 2014, there were 28,127 service outsourcing enterprises in China with 6.072 million employees, 4.047 million of whom were college (including junior college) graduates, accounting for 66.7% of all the employees.

3. The industry transformed to the mutual development of both quantity and quality. Innovation has become the core driving force of service outsourcing enterprises, and the enterprises transformed from depending on low-cost competition to winning through intelligence input. In 2014, the offshore knowledge process outsourcing mainly featured knowledge and research and development undertaken by China reached US$ 18.67 billion, accounting for 33.4% of the total offshore executed volume, a steady increase. The innovation and application of cloud computing, big data and mobile internet drove China鈥檚 service outsourcing industry to extend to the high-end of the value chain, and the business structure was optimized continuously.

4. Trade and economic cooperation with countries related to the Belt and Road Initiatives was deepened. Trade and economic cooperation is the basis and precursor of the construction of the Belt and Road. In 2014, the contract volume and executed volume of the service outsourcing contracts in those countries undertaken by China was US$ 12.5 billion and US$ 9.84 billion respectively, up 25.2% and 36.3% year on year respectively. Through cooperation in service outsourcing business, China鈥檚 economic and trade communication and economic integration with those countries were further deepened.

5. Offshore service outsourcing business was expanded to almost 200 countries. In 2014, the executed volume of the offshore service outsourcing undertaken by China in the U.S., the EU, Hong Kong and Japan totaled US$ 34.65 billion, accounting for 62% of the total executed volume, 2.9 percentage points lower than that of the same period of last year. Offshore service outsourcing expanded from the U.S., the EU, Hong Kong and Japan to about 200 countries and regions in Southeast Asia, Oceania, Middle East, Latin America and Africa. The market diversification appeared more obviously.

II. Policy effect in service outsourcing was obvious through joint efforts and different measures.

1. The Opinions on Promoting Development of Service Outsourcing Industry of the State Council was issued. Through amounts of researches and studies, and opinions of local departments, industrial organizations, enterprises and research organizations, the Ministry of Commerce formulated the Opinions on Promoting Development of Service Outsourcing Industry, and reported to the State Council together with 20 departments including the State Development and Reform Commission. It was issued on December 31, 2014 after the deliberation and approval of the Executive Meeting of the State Council.
Adapting to the requirements of the economic new normal, this is the first time of the State Council to make a comprehensive deployment to promote the development of the service outsourcing industry, which is of great significance to promoting structure adjustment and forming the new support of industrial upgrading, new spotlight of foreign trade growth, new engine of modern service industry development and expand new channel of employment.

2. The talent cultivating mechanism of service outsourcing was innovated. Summarizing the experience of talent cultivating pilot of service outsourcing in colleges of Jiangsu and Zhejiang province, the Ministry of Commerce, together with the Ministry of Education, issued the Opinions of the Ministry of Commerce and the Ministry of Education on Innovating Talent Cultivating Mechanism and Promoting Development Capacity of Service Outsourcing Industry, to further deepen talent cultivating mechanism reform, optimize major and talent structure, guide undergraduates to innovate and start business, and optimize policy and organizational guarantee of talent cultivating.

3. The pilot policy of the Suzhou Industrial Park was publicized. Together with the Ministry of Finance and the State Administration of Taxation, the Ministry of Commerce made an special survey on the pilot policy of the Suzhou Industrial Park to relax restrictions of identified conditions of technology-advanced service enterprises, and reported to the State Council for approval to publicize the pilot policy to 21 demonstration cities, after which, the Ministry of Commerce issued the Notice on Optimizing the Policy on Corporate Income Tax of Technology-Advanced Service Enterprises together with five departments including the Ministry of Finance.

4. Financial credit support and innovation was strengthened. Together with the Ministry of Finance, the Ministry of Commerce incorporated international service outsourcing business into the Management Methods of the Special Fund of Foreign Economic and Trade Development, and supported its talent training, international certification and public platform building as a key support direction. We played the coordination role of financial policies, fiscal policies and industrial polices, and optimized the role of export credit of resource allocation, to support the development of a batch of large and medium-sized service outsourcing enterprises with international competitiveness and innovative vitality.

III. Explicating the emphasis and integrating resources, we promoted the rapid development of the service outsourcing industry.

The Opinions on Promoting Development of Service Outsourcing Industry of the State Council pointed out that, we should make efforts to stimulate the innovative impetus of the enterprises and market vitality around cultivating competitive new advantage and creating a favorable development environment, and sticking to the principle of reform and innovation, stressing the emphasis, implementing step by step and demonstration and clustering, to promote the service outsourcing industry to a new level.

The year of 2015 is the end of the 鈥淭welfth Five-Year Plan鈥 and also the opening of comprehensively promoting administration by law. According to the requirements of the Executive Meeting of the State Council and the Opinions on Promoting Development of Service Outsourcing Industry of the State Council, the Ministry of Commerce will make clear the key tasks, strengthen coordination, integrate policy resources, promote the implementation, and drive the service outsourcing industry to become the new support of industrial upgrading, new spotlight of foreign trade growth, new engine of modern service industry development and new channel of expanding employment.

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