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China Location Trends

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  1. By CBRE Consulting, Hong Kong China Location Trends August 19, 2009

  2. A Snapshot – China Economy 2008 GDP by Country (USD Billion) • China’s economy demonstrated rapid growth over the last three decades, and now is the 2nd largest in Asia (after Japan). • While the the country has become the manufacturing hub of the world, known as the “world’s factory”, the Chinese government’s preferential policies and initiatives are now focusing more on promoting more value-added economic activities, including the development of the high-value outsourcing sector. Data Source: International Monetary Fund China GDP & CPI Trends Data Source: National Bureau of Statistics, PRC

  3. Key BPO Locations in China XIAN TAIWAN First-tier Cities Second-tier Cities Source: CBRE

  4. Key BPO Locations in China • Beijing,Shanghai, Guangzhouand Shenzhen currently account for the vast majority of the offshoring market. While traditionally the market is dominated by low-end, IT-based development, higher-value support services such as call centres and data processing centres are also gaining traction. The increased demand for these support functions is also a result of the stronger domestic BPO market, which is driven by the rapid development of the banking and insurance sectors. • Cities in the central/north include Dalian,Xi’an, Shenyangare considered the ones to watch in the future, given the large pool of low cost human resources from some universities/colleagues in the areas and the prevalence of other foreign languages.

  5. The outsourcing sector in China remains in its early stages of development. Unlike India, the country is still an “exporter” rather than a “consumer”. BPO spending in China is expected to grow from USD273 million in 2007 to USD721 million by 2012, for a five-year CAGR(2) of 21.4%. China’s BPO Market Development of China’s BPO Market

  6. Recognizing China’s potential as a major BPO hotspot in the future, more attention has been paid to the outsourcing sector. 20 cities have been identified as China’s key BPO hubs. The 20 Designated Cites: China’s BPO Market

  7. Talent Supply for China’s BPO Industry Supply of Educated Talent • Talent supply of university graduates is promising –approx. 6 million new university graduates entered into the labor market in 2008. • However, as BPO jobs are generally perceived as low-end operationally orientated rather than strategic, people with excellent English skill may not be attracted to work in the BPO industry. Source : Projob51

  8. Talent Supply for China’s BPO Industry • High labor turnover in the BPO industry has become a growing concern. The rising turnover rate may be due to 1) competition for labor as a result of the increasing numbers of BPO employers and 2) job nature associated with the BPO industry. Source : Hewitt (July 2009) Employee’sCareer Motivation Drivers Source : Accenture (2008) Source : Hewitt (2007)

  9. Beijing LABOR AVAILABILITY • Population: 12,130,000 • Number of graduates: 466,166 • Population Growth : 1.6% (avg) • Unemployment Rate 1.8% • 83 universities / colleges • Major schools: Tsinghua University, Beijing University, Beijing Language and Culture University, University of Science and Technology Beijing • Multinational banks – Citibank, ABN AMRO Bank, HSBC etc • Telecoms companies – Oracle, Motorola, Samsung, Ericsson, etc • IT - Acer Computer, Microsoft, IBM, Yahoo, etc • Others – Hitachi, Nestle, Ricoh, Shell etc COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • Beijing is the capital of the country, with close access to government authorities. • Good infrastructure – significantly improved in preparation for the 2008 Olympics. • Improved English skills in recent years. • Availability of labor in various foreign language (high concentration of universities/foreign schools) • Rising costs in the recent years (both labor and accommodation) but still lower than Shanghai • Heavy traffic congestion and pollution issues (the latter has improved in recent years) WEAKNESSES

  10. Guangzhou LABOR AVAILABILITY • Population: 9,487,500 • Number of graduates: 330,000 • Population Growth : 1.4% • Unemployment Rate 2.3% • 63 Universities ./ Colleagues (14 foreign language schools) • Major schools include: South China University of Technology, Guangdong University of Foreign Studies • Hong Kong-based banks - Hang Seng Bank, HSBC etc) • Telecoms companies -. Hutchison Whampoa, PCCW, CTI Telecom etc • Others: IT - Genesys Telecommunications Laboratories & IBM, KLM / Air France flyers Accenture Delivery Centres COLLEGES & UNIVERSITIES MAJOR OCCUPIERS STRENGTHS • Close proximity to Hong Kong (geographically and culturally) • Availability of Cantonese speaking labor (which can serve the Hong Kong and Macau markets) • Well-developed infrastructure and transportation system (international airport/intra-city railway) • Government policy – development of pan Pearl River Delta in Southern China • Social infrastructure and good standard of living • High attrition due to the presence of competitors in the voice-based BPOs. • Heavy traffic congestion and pollution issues WEAKNESSES

  11. Dalian LABOR AVAILABILITY • Population: 6,130,000 • Number of graduates: 36,000 • Population Growth : 1.25% • Unemployment Rate 2.4% • The city has 23 general institutions of higher education. • Major schools include Dalian University of Technology, Dalian Polytechnic University, Dalian Jiaotong University. • Key product development centre for GE, Intel, Dell, HP, IBM, Siemens, Sony Microsoft, Philips • Other electronic firms for hardware design and embedded software. COLLEGES & UNIVERSITIES STRENGTHS MAJOR OCCUPIERS • ITOs are getting traction, especially in software development, due to government support - preferential tax policies and establishment of IT/hi-tech parks. • Proximity to other Asian markets (Japan and Korea) + Ability to serve domestic markets. • Availability of labor with other Asian language (such as Japanese and Korean) • Lower costs than 1st-tier cities (both labor and accommodation) WEAKNESSES • City development and infrastructure are not as mature /developed as compared with 1st tier cities • Labor with English skill is considered limited • In general, less exposure to western culture.

  12. CB RICHARD ELLIS CBRE Consulting, Hong Kong For more information, please contact: Karen Chan Director, CBRE Consulting Hong Kong Dir: +852 2820 2809 karen.chan@cbre.com.hk Ellen Li Associate Director, CBRE Consulting Hong Kong Dir: +852 2820 2897 ellen.li@cbre.com.hk Contact Information