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China Government gives more favorable policies to Outsourcing Industry

China government is to carry on a series of incentives to boost the nation’s services outsourcing industry, such as tax rebates and credit support. In order to launch more favorable policies for the services outsourcing industry, the commerce ministry will work with related government departments such as the Ministry of Finance and the State Administration of Taxation. It is believed that government support is very essential for China to promote the sector’s growth and develop itself into a top outsourcing destination.
Already a manufacturing powerhouse, China has boosting its services outsourcing sector diligently over resent years in order to move up the value chain and boost innovation in the IT sector. In 2006, its offshore outsourcing revenue grew more than 40 percent to $1.4 million, but that still accounts for just 2 percent of the global market.

The China government will encourage multinational companies to set up services outsourcing operations in the nation and they are also welcome to set up joint ventures with Chinese outsourcing companies. The government will first promote some key regions like the Shanghai, Nanjing and Hangzhou Yangzi Delta area and Pearl River deltas. In addition, local governments will be encouraged to support major outsourcing companies in those regions.

Last year, The Ministry of Commerce launched a pilot project to develop 11 bases, including Beijing, shanghai, Dalian, Nanjing and Suzhou for services outsourcing across the country. All these are meant to attract 100 multinational corporations to transfer part of their outsourcing business and create 1,000 large-scale international services outsourcing companies. In recent years, outsourcing companies from all over the world have been expanding aggressively in China in order to take advantage of its low cost talent pool and take a slice of booming IT service market. One of the largest IT companies HP currently has some 2,700 engineers in China. Tata Consultancy Services which is one of India’s most powerful IT outfits established a new outsourcing joint venture in Beijing with Microsoft and three Chinese partners in February and it hope that its headcount in China can increase tenfold to 5,000 by 2010. Thus, it can become one of the largest players in the country.

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China Top 10 Merger and Acquisition M&A bids in 2007

In 2007, China merger and acquisition activities with buyout deals which made a stir were most concerned and witnessed by many people. They often altered the competitive landscape in a number of industries.

China’s top 10 M&A bids in 2007 have been announced by China merger and acquisition association. The association also invited financial experts to select the 10 most influential M&A bids from a list of 30. The top 10 bids were so close that they became the spotlight of the media in the past ten years. The nation’s financial sector played a major role of making China M&A bids headline in order to against the backdrop of US sub prime mortgage crisis. In the list, it showed up with 5 bids in this sector to defy the global credit crunch.

China investment Corp which is the country’s new State investment agency plowed $3 billion into private equity which underscored China’s increasing boldness in overseas investment and diversified its rising forex reserves.

Soon after, by buying into British Barclays Bank, China development became the heart of a biding war. It just liked Barclays took on a consortium of European banks led by Royal Bank Scotland Group PLC to acquire Dutch banking giant ABN Amro Holding HV. After these two milestone cross-border M&As, the industrial and commercial bank of china found there was a great opportunity in South Africa then invest $5.5 billion into that country’s largest commercial bank, Standard Bank, for a 20% stake, the biggest foreign acquisition by Chinese bank to date. Chinese insurer Ping An group sought 4.18% stake for 1.81 billion euros in Fortis, a Belgian financial service provider running banking and insurance business, becoming its biggest single shareholder.

Very important State-owned enterprises also showed their keen interest in the markets of developing countries. China Mobile communications bought 88.6% of Paktel which is the fifth largest carrier in Pakistan from Luxembourg based Millicom International Cellular. The deal was valued at $460 million.

State Grid Corp of China, which was a consortium led by China’s biggest State power company ,won a $3.59 billion bid because it had a 25 year contract to manage the Philippines’ electricity grid by narrowly beating the one led by food and drinks maker San Miguel. It would well be the largest deal in Philippines’ history.

Foreign company also rushed to purchase stakes in their Chinese counterparts as a stepping-stone to expand in the world’s fastest growing market. Arcelor Mittal, who was the world’s largest steelmaker, bought 28% stakes in China oriental Group for $647 million.

But some foreign companies’ acquisition bids did not go smoothly. While Singapore Airlines Temasek were still struggling to obtain a stake in China Eastern Airlines, French food and beverage maker group Danone SA’s bid meant to control its joint venture with Wahaha and this resulted in a bitter war of words.

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