Source Code China: The New Global Hub of IT (Information Technology) Outsourcing

Chapter 9. China’s Legal Framework

For legal purposes, outsourcing can be defined as a transaction or process in which the supplier of outsourced services is based in a distant country, meaning in a country other than the one where the products or services will be sold or consumed. Today, outsourcing is a common practice throughout the technology industry and IT is the function most likely to be outsourced. With the increasingly rapid pace of technology development, many outsourcers are trying to keep up with the latest advances and prefer to shift the responsibility or risk to a firm that specializes in IT. While being evaluated with the strongest growth potential, China has been the country to watch in the global outsourcing market. According to the Offshore Location Attractiveness Index provided by A.T. Kearney, China is one of the most preferred outsourcing destinations.

Why outsource to China? Considering such complex issues as cultural differences, IT advancement, and legislative framework, the United States, Europe, and Japan have been the most popular destinations for outsourcing services in the past few years. Nevertheless, total investment scales on global offshore outsourcing are showing an upward trend. China, India, and other Asian countries are becoming more attractive and competitive as outsourcing service providers. Fast growth in those Asian countries, however, has raised a number of legal, political, and social concerns in the actual practice of outsourcing.

Because ...