China becomes Japan's biggest software outsourcing base

China's growing software outsourcing trade with Japan is expected to rise even faster after Premier Wen Jiabao's "ice-melting" visit to Japan.

China accounted for more than 60 percent of Japan's outsourced software trade in 2006 and has become the country's biggest software outsourcing base, said Mine Shentaro, of the Japan External Trade Organization based in Dalian, northeast China's Liaoning Province.

According to statistics published last month by CCID, a leading market research firm in IT sector, China's software outsourcing business reached 1.43 billion U.S. dollars in 2006 and about 60 percent of China's software trade is Japan-oriented.

Dalian Hi-Think Computer Technologies (DHC) Co. Ltd is one of China's leading software outsourcing firms. Manager Liu Jun is proud of its big-name customers, including technology giants Hitachi, Sony, Mitsubishi and NEC.

"DHC started outsourcing computer software from Japan in 1996, a time when Sino-Japanese relations were at low ebb. Political hindrances have not impeded our business," said Liu.

DHC's business with Japan has grown 30 percent annually since 1996 and now employs 2,000 people. Last year, the company exported software worth 50 million U.S. dollars to Japan.

Dalian became the outsourcing center of information technology to Japan due to its geographical proximity and its skilled labor force.

The city's software industry sales last year set a new record at 10 billion yuan (1.23 billion U.S. dollars), maintaining a 60 percent annual rise in the past six years.

Of the sales, processing outsourced software contributed 3.7 billion yuan (456 million U.S. dollars), of which at least 80 percent was for Japanese companies.

The city has 20,000 people working in the software outsourcing sector and 70 percent of them speak Japanese.

In addition, about 40,000 students in Dalian are learning software technologies in five professional institutions and 22 colleges. Half of the students have received training on the Japanese language and will work for outsourcing business upon graduation.

Neusoft Group, China's biggest software outsourcing processor whose revenue reached 100 million U.S. dollars in 2006, has set up two subsidiaries in Japan with an aim of advancing business in the country.

However, Liu Jiren, board chairman of the group, said China still has a long way to go before catching up with India.

"Outsourcing businesses account for 80 percent of India's software industry, while in China the ratio is just 10 percent. To catch up with India, we have the only shortcut -- focusing on and further exploring the Japanese market," Liu said.

According to a government plan for the development of software and information services, China aims to generate 168 billion U.S. dollars from the software sector and export 12.5 billion U.S. dollars worth of software services in 2010.

Jin Guowei, deputy director of Dalian Information Technology Bureau, is confident in the future. "With the improvement of bilateral ties, I believe the industry will become more prosperous."

"The friendship between China and Japan is an irreversible trend. Premier Wen Jiabao's visit to Japan is good for the two countries. I hope after the visit more Japanese can put away misgivings and start cooperating with Chinese firms in the software industry. It will be a win-win solution,"said Jin.

"While European and American companies are choosing India as an outsourcing base, Japanese firms prefer China because we are close neighbors and have similar cultural backgrounds," said Noshiro Yasuo, president of Fujitsu System Engineering Co., Ltd in northwest China's Xi'an, Shaanxi Province.

"Premier Wen's visit to Japan will give us more confidence to expand our business in China," he added.

Source: Xinhua

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