WHY CHINA? WHY NOW? Why China is becoming an increasingly attractive destination for BPO services CHINA’S ECONOMY HAS SUSTAINED GROWTH DURING THE GFC The UK, Europe and USA are still struggling with the global financial crisis, characterised by: • low GDP growth • excess liquidity and • high volatility in finance markets, and • a crisis in European sovereign debt. China’s economy has been affected far less. 12.0 10.7 10.0 8.0 9.8 6.8 5.0 6.0 3.1 4.0 2.0 USA 0.4 China 0.0 -2.0 -4.0 UK -0.5 -2.0 Q1 2009 Q1 2010 Q1 2011 -6.0 -8.0 -6.8 % GDP growth PRACTICAL LOGIC PTY LTD TM CHINA OFFERS HIGHER SHARE GROWTH POTENTIAL Shareholders demand growth in company value, even in tough economic times. Companies in poor performing western economies are looking to operate in high growth markets, where their financial performance could be improved. We have been approached by several companies in the last 6 months to assist them to find partners in China through which to grow their businesses. I am introducing western companies for: • joint venture partnerships • distribution channel partnerships • supplier agreements • direct entry BPO investments This shows an increasing external demand for China as an attractive growth market. PRACTICAL LOGIC PTY LTD TM CHINA’S WTO POLICIES ARE A CATALYST FOR TRANSFORMATIONAL CHANGE China’s entry into WTO in September 2001 has been the catalyst for an extraordinary number of initiatives: legislative changes, social changes and infrastructure changes. One example is that China’s top 47 banks have been opened up to foreign investors. Now international banks can own up to 25% of those Chinese banks. China has encouraged this investment as a means of introducing WTOcompliant banking practices rapidly into China’s banking system. This is driving significant changes to the way financial services business is undertaken in China. One example has been the introduction of credit cards into China’s population since the founding of the State Credit Bureau in 2003. • High-tech BPO applications are used to process credit card applications • Sophisticated credit scoring analytics are used to manage risk • Payment systems like Ali-pay, 99-Bill, SmartPay & Lakala have evolved to accommodate hybrid card payments that combine traditional Chinese payment customs with leading edge online systems. PRACTICAL LOGIC PTY LTD TM CHINA’S DRIVE TOWARDS A SERVICES-BASED ECONOMY China has succeeded as the world’s strong outsourced manufacturing base, providing high volume, high quality, low cost outsourced manufacturing As transportation and logistics infrastructure becomes increasingly sophisticated, China’s western and outlying provinces, with their abundant populations of lower cost labour are attracting these services away from the Eastern seaboard. MOFCOM has invested trillions of RMB into 21 model cities, to transform them from their traditional manufacturing bases to strong services-based economies. High tech parks are proliferating, often with other government involvement (e.g. Singapore and Hong Kong) In combination with customised education courses, methodical talent development programmes and the systematic direction of university graduates into services occupations, a thriving industry in ITO, BPO and KPO is transforming these cities. PRACTICAL LOGIC PTY LTD TM LESSONS FROM OFFSHORE APPLIED TO ONSHORE The early stages of the service economy focused on offshoring – leveraging low cost labour in China to attract foreign work to be undertaken in China. Chinese students in western universities (UK, USA, Australia, NZ) have returned to establish companies that bring digitised BPO applications from foreign companies. Over 10 years Chinese BPO service providers have built their scale, matured their business models, refined their operating platforms, attained ISO and CMMI accreditations, and become world class. Now the stars are starting to align, and these pieces of the puzzle are beginning to reveal a new picture, combining: • the skills & process capabilities learned from serving offshore BPO markets, • the knowledge of western banking practices learned through international investment in China’s banks, • The growing confidence of China’s largest corporations in its ITO & BPO services industry • Government policies driving government institutions to outsource non-core processes to stimulate the transformation of the services economy. PRACTICAL LOGIC PTY LTD TM CHINA BURGEONING DOMESTIC MARKET FOR ITO, KPO & BPO In consequence China is now seeing the emergence of a very strong outsourced services sector serving its domestic market. In ITO, this phenomenon is also driving demand for double-byte character (Chinese language) operating systems, workflow platforms, new customer application development and the localisation (translation) of USA and European software programmes. This strong growth potential is attracting venture capitalists to invest in strong local BPO companies, e.g.: • China Data Group: (Beijing, Kunshan etc.) • M&Y Global Services: (Daqing, Zhuhai, Shanghai, Beijing & Cardiff & London UK) • CompuPacific (Beijing, Xi ‘An and Michigan USA) These companies are poised to capitalise on what is thought to be the blossoming of China’s ITO, BPO & KPO industry on a scale that only China’s 1.3 billion people could offer. PRACTICAL LOGIC PTY LTD TM CHINA CREATES NEW INDUSTRIES TO ACCELERATE GROWTH On 13th March 2011 Colliers International in the Philippines reported that growth in the BPO sector is driving unprecedented growth in the real estate sector. China has invested heavily in 21 BPO cities. The growth in China’s BPO sector will outstrip that of the Philippines. China has changed its laws around the leasing of land from the state. It is now possible to take 70 year leases. This is similar to Crown leases in UK, Torrens title as used in several USA and Australian states. On 16th March 2007 China also changed its laws, permitting the private ownership of property sitting on the land. This has opened up the scope for a new industry in property transaction management. Here in Hangzhou, the government of Zhejiang province sent 20 executives from the Ministry of Land & Resources to Australia, in December 2010, for training in advanced property registry management practices. The growth in BPO-related real estate and property transaction management services experienced in the Philippines could soon be seen in China. PRACTICAL LOGIC PTY LTD TM Practical Logic works with: • large western corporations and government agencies; • large Chinese corporations and government agencies; and • Chinese BPO service providers to build bridges between them. THANK YOU We introduce organisations to each other domestically and internationally. We do the research, planning and business development that make these relationships work. PRACTICAL LOGIC PTY LTD TM