China is one of the top outsourcing nations in the world, which is no secret. The country can accommodate a wide range of outsourcing options, including those related to business operations, IT services, manufacturing, and more. It is not surprising that many organizations are considering outsourcing to China given China’s ongoing expansion and improvement of their working environment.
Foreign businesses can expand their access to a huge pool of talent, skills, services, and entry into neighboring markets in China. This not only enables cost-cutting and profit maximization, but also enhances business operations’ general effectiveness, thereby differentiating them in their own marketplaces.
Find out why you should outsource to China by reading on.
What types of business activity can be outsourced to China?
China’s aptitude for outsourcing opportunities in business processing, manufacturing, and IT outsourcing is constantly expanding. Each of these categories will be summarized below, along with some common business activities associated with each that can be outsourced to China.
Manufacturing outsourcing
China is the world’s largest manufacturing nation, having maintained its dominance since the 1950s through major industrial reforms. As a result, foreign companies looking to outsource all or part of their manufacturing needs will find China to be a goldmine. Even some of the world’s largest consumer-oriented multinational corporations, such as Apple and Tesla, have chosen to expand or relocate their manufacturing operations to China. Electronics, clothing and textiles, shoe manufacturing, furniture, and plastic products are among the most common products that can be outsourced to China.
IT outsourcing
The global push for digital transformation has enabled China to lay a solid foundation for future IT outsourcing opportunities. In-house software development is notoriously expensive for any business, so being able to acquire high-quality solutions at a fraction of the cost makes China an appealing option for foreign companies. Companies can outsource database development, web development, virtual helpdesks, application support, and management services across all of these avenues, just as they can its ever-growing market of innovative local software solutions.
Business process outsourcing
The Chinese market share for providing business process outsourcing (BPO) services to foreign firms has increased exponentially. Front and back-office processes are commonly outsourced to China for BPO services. Accounting processes such as payroll solutions, administrative tasks such as data entry, customer experience through contact centers, procurement services, digital marketing, content creation, and travel reservations and itinerary bookings are among the most popular types of BPO services.
What are the benefits of outsourcing to China?
Cost Saving
The undeniable primary reason and benefit for companies to outsource to China is that it is cost effective in a variety of ways. China offers numerous opportunities to save money and maximize profits, as well as easy access to a large pool of local talent in a variety of industries. There are also lower salary caps for basic or specialized skill sets, as well as cheap access to raw materials and manufactured goods.
Furthermore, many mundane and repetitive business processes, such as employee onboarding or purchase order processing, that were previously only completed by manual labor, have been transformed into autonomous and effective technological solutions. China offers numerous opportunities to use locally developed software in a wide range of business processing tasks. This provides businesses with a one-of-a-kind opportunity to eliminate all associated human labor costs, either partially or entirely.
Access to Innovation
China is a country that is proud of its achievements. The country is home to innovative businesses and encourages research and development. Outsourcing to China will provide you with access to vast research resources and cutting-edge technology. This will provide you with an advantage over your competitors. Furthermore, this will assist your company in pushing your knowledge and boundaries in terms of innovation and creating or doing something new.
Market Expansion Opportunities
A densely populated country means a large number of potential customers. Companies that outsource to China gain access to one of the world’s largest consumer markets. China is also strategically located between the Asian and European markets. This can provide you with numerous opportunities to introduce your products to other international markets.
Inexpensive Workforce
One of the most frequently mentioned advantages of outsourcing to China is the low cost. You can save money and increase profits while still retaining top talent. Basic or specialized skills have lower pay brackets. Raw materials and manufactured goods are also less expensive. Furthermore, there are numerous technological solutions available to process business transactions while eliminating the need for manual labor.
Surportive Government Policies
Strict government regulations are one of the few impediments to outsourcing. You won’t encounter this in China. The Chinese government has policies that encourage foreign companies to outsource to China. Furthermore, the government has funded numerous projects and infrastructures to assist these businesses and smooth the outsourcing process.
What are the disadvantages of outsourcing to China?
Differences in Language and Culture
Language and cultural barriers can be a significant challenge when looking to outsource to any country. Although language barriers are easy to overcome, cultural barriers can be more difficult to overcome and result in a misalignment of business vision in the future.
Compliance
Companies looking to hire foreign talent in China must consider a few factors. Chinese labor and employment law is relatively complex, and the Chinese government audits and enforces it around the clock. There is also a competing tension between policies aimed at accelerating and controlling innovation, as evidenced by the establishment of the Chinese Social Credit System, a system designed to control and determine a company’s “trustworthiness” in its business operations. When outsourcing to China, it is critical to understand these regulatory systems and the potential consequences of noncompliance.
Control
Control over business processes can be lost when businesses outsource to third-party agencies. Outsourcing to China can expose you to quality control issues, intellectual property (IP) violations, and disparities in task and employee performance monitoring standards.
A key consideration for a company looking to outsource its product manufacturing is the fact that quality control practices in China are still underdeveloped across many industries. Quality control issues may indicate that your product does not meet the local standards established by your jurisdiction.
Foreign Intellectual Property (IP) rights and international copyright standards have also been violated in China in the past. If you want to create or already have a cutting-edge product on the market, this is a huge problem.
If these points are not addressed, they can have a significant negative impact on a company’s finances and reputation.
If your company is considering outsourcing to China but is unsure where to begin, China Payroll can assist you in getting the process started.We are a leading expert in China Payroll solutions, acting as the employer of record within China, saving costs and eliminating the need to establish a legal entity in China. This means you’ll be able to start trading in China quickly and legally. If you want to learn more about outsourcing your business to China, book a free business consultation with China Payroll today!
