1. China has become a leading country globally in business processing, manufacturing, and Information Technology (IT) outsourcing opportunities for foreign companies.
2. Education is highly valued in Chinese culture — this means as an outsourcing destination, foreign companies will have access to an immense pool of highly educated individuals with specialized skills to meet current and future market demands.
3. One of the top benefits of outsourcing to China is cost saving, while key disadvantages can be related to quality control and Intellectual Property (IP) concerns.
4. There are a several issues related to compliance that need to be overcome when outsourcing to China – A Global PEO can help mitigate any compliance challenges, ensuring a smooth transition into the Chinese market.
China has advanced to be one of the world’s leading outsourcing nations — expanding as more than a manufacturing hub to catering in outsourcing opportunities across other capacities – such as business process and IT outsourcing.
As the most populated country in the world, China presents a unique opportunity to foreign companies to increase their access to a vast pool of talent, skills, services, and entry into neighbouring markets. Not only can this cut costs and maximise profits but improve the overall efficiency in business operations – ultimately setting them apart within their internal markets.
This article will highlight China as an outsourcing destination and discuss the top benefits and disadvantages companies need to consider when choosing to outsource to China in any capacity.
What is the definition of outsourcing?
In business terms, the practice of outsourcing is when a company looks to hire a third-party to perform duties, create goods, support operations, or provide a service to the company. Some examples of a third-party source is an individual with specialised skills (think consulting), an entire department (IT, HR, legal or accounting), a software solution (SaaS or PaaS), or a specific service (data entry, content creation, marketing etc.). Companies choose to outsource to lower costs and improve efficiencies and gain a strategic competitive advantage. A company can outsource onshore, offshore or to neighbouring countries.
What types of business activity can be outsourced to China?
China is constantly expanding its aptitude for outsourcing opportunities in business processing, manufacturing, and IT outsourcing. Below will be a brief rundown for each of these categories and highlight some common business activities associated with each that can be outsourced to China.
What are the benefits of outsourcing to China?
Below will be a brief synopsis of the top three benefits of outsourcing to China.
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What are the disadvantages of outsourcing to China?
It’s important to recognise and understand what the disadvantages are with any new business endeavour. Here are the top three disadvantages that should be considered when choosing to outsource to China.
In a recent Deloitte survey, 27 percent of respondents identified as a key learning from prior outsourcing, the importance of a third-party strategic advisor. If you have no local connections in China, you might consider hiring a Global Professional Employment Organization (a ‘Global PEO‘) to facilitate your entrance into the Chinese market. Global PEOs can also help companies with an existing presence in China, but who are concerned they are not meeting their compliance requirements.
These third-party companies take over and maintain compliance through rigorous contracts. This ensures a business is and can remain compliant in their new market. Although considered a cost-effective measure to get the ball rolling, it can take considerable time researching to find an appropriate Global PEO that is good value for money and can cater to all required business needs.
If your company is seriously looking at outsourcing to China but is not sure where to even begin – then Horizons can provide the needed support in getting the process started. For example, Horizons are leading experts in providing China Payroll solutions, acting as the employer of record within China, saving on costs and the need to establish a legal entity in China. This means you will be able to begin quickly and compliantly trading in China. Check out how Horizons can help your business expand globally.
Frequently asked questions
There are many reasons why companies choose to outsource to China. China presents as an enticing proposition for companies looking to expand globally through outsourcing. Outsourcing to China introduces access to new markets, specialised skills, and an abundance of highly educated talent. Labour costs in China are less across many industries compared to western standards, meaning businesses can elevate their success to the next level.
Outsourcing your business needs to China does not have to be a timely or costly endeavour. Companies often benefit from using a third-party firm, such as a Global PEO, to leverage their connections in China to help support an outsourcing operation.