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12:06AM

The Indian-Chinese rivalry on outsourcing: India's upper hand for now

FT story on how India fears China will become a major competitor in outsourcing of services, with the concluding judgment being:  1) China's share remains but a fraction of India's for now; and 2) even if it grows a great deal, this global economy IS big enough for the both of them.

Right now, China's service outsourcing sector is growing faster, but it's where India was years ago, so that steep trajectory is unremarkable.  The Indians are just scared because they know what it means to roll up markets and worry about the Chinese doing the same to them.

Beijing's declared goal:  ten internationally competitive outsourcing hubs with 1k vending Chinese companies pulling in 100 multinational companies as client.  Naturally, China is making some headway in the US and Europe--traditional strongholds of the Indians.  

Why China won't catch up here?  India's language advantage (and frankly, trust advantage) and China's big domestic market.  Plus China is small fry compared to India ($10b to India's $50b).  China's domestic IT services market is already bigger than India's, so China's service outsourcing industry can expect a lot of growth there in addition to whatever it wins abroad.  India's industry would love to capture some of that China pie as state-owned banks and telecoms open up more in that way, but I would expect Beijing to make sure most of that business stays home.

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