In China, we may have been inwardly pleased because China was known as the "World Factory", and proud for the huge trade surplus. But today, when we are aware of the increasing environmental pollution, over-exploitation of natural resources and a large number of core technologies are limited to Foreigners; when we found that "800 million shirts can only exchange for a Boeing aircraft", we do realize that it may not be a proud thing to build a ¡°world factory". In view of this situation, people of insight raised the opinion that China should complete the transition from the "World Factory" to "World's Office," which I believe just directs China's future development. The most realistic path of sustainable development in China today is to vigorously develop the service outsourcing industry as representative of modern service industry.
International trends of industry transfer and the current status of China's industrial structure
When the information flow and logistics has developed, the world becomes flat, so it¡¯s no longer important where the products are produced. At this time, each area's economic experience is using its own technology, personnel, information superiority and make use of specialized division of labor around the world to have a choice of industrial development, retain those industries of high value-added, environmental protected and relatively lower natural resource consumption, in order to achieve high growth and high-yield, protect the environment and natural resources, while t shifting out the manufacturing of low value-added, serious polluted and serious resource consumption.
For example, since the 1980s, Japan has started to transfer some manufacturing overseas, such as iron and steel, cement, automobiles, household appliances, especially to Southeast Asia and China; Hong Kong transferred 80% -90% of manufacturing which needs labor-intensive and low value-added processes to the Pearl River Delta region, and opened more than 40,000 enterprises. Also did the United States. In Midwest of the US, including Illinois, Indiana, Michigan, Ohio and Pennsylvania, which were known as the world's industrial base and attracts attention from the world, includes the famous automobile city of Detroit, steel and heavy industry city of Pittsburgh, heavy industry cities of Cleveland and Chicago. But since the middle of last century, a large number of manufacturing in these regions began to relocate overseas, and those areas have gone though economic depression for even a period of time. Then, Finance, communications, tourism, medical care, and other service industries developed in full swing in these areas. According to data in the "CIA Overview about countries in the world", the secondary industry accounted for only 20.6 per cent in the U.S. GDP proportion of 2007, while the third / fourth estate (services) accounted to 78.5% of the GDP. The United States successfully achieved a transfer and upgrading of the industry. Now it mainly engaged in the research and development of new products, it has the world¡¯s largest number of patented technologies, and even dominant the global economic rules formulation. It is the monopoly provider of information industry. The demand for manufactured goods had also been met by the huge trade deficit.
From China's current situation, the proportion structure of the China's three major industries in GDP is ordered as "231", according to the data of "National Economic and social Development of statistical Bulletin of the People's Republic of China in 2007" by National Bureau of Statistics, the added proportion of the first, second and third industry in GDP were 11.7 percent, 49.2 percent and 39.1 percent respectively, while the added proportion of the third industry was dropped by 0.3 percentage comparing that in 2006. According to incomplete statistics, at present, the world's average level for the added proportion of the third industry in GNP is around 50 per cent, the developed countries is 60 to 70 percent, and the developing countries is more than 40 percent.
The worldwide pattern of the industrial division
High-end industries will be the strategic commanding point in the world's future economic competition. The current economic globalization has increasingly deepening, interdependence among international goods, services and capital market is continually deepening, and pyramid structure of worldwide industrial labor division is taking shape.
The United States is at the top of the pyramid, the main features of whose economy is knowledge-based, its finance, education / scientific research, telecommunications, retail, entertainment, legal, medical, civil aviation rank first in the world, and it has maintained the position of the largest service trade export, as well as owns the world's largest number of patents, with the most powerful research and development capabilities and innovative ability.
The United Kingdom, Japan and South Korea are in the second level. Modern service industries developed in such countries, which are often engaged in manufacturing of technological superiority.
For example, Japan and South Korea mainly engaged in capital-intensive, technology involved and high added value production of common and high-grade consumer goods. Japan was also known as the "world factory", which has now successfully achieved industry upgrade.
China and many developing countries are still in the third level, mainly engaged in labor-intensive, common and low-grade production and processing of final consumer goods. At this level, technology is relatively mature, but it has relative lack of demand, and excess supply has become a universal phenomenon, so prices become the most important competitive factors. When competition is intense, profits will be increasingly thin. China's textile industry is the best example.
At the bottom level of the pyramid is the vast majority of low-income countries such as Bangladesh in Asia and other lots of African countries, which are mainly engaged in production and processing of agriculture and primary goods.
China's advantages and inevitability in developing services outsourcing industry
The basic national conditions of China now is its 1.36 billion population, huge pressure on the environment and scarce resources, water and forest resources account for only a quarter of the world¡¯s average, per capita of oil resources is less than one-fifth of the world's average level. At the same time, China's energy consumption is at a serious low-output ratio. Statistics show that in 2003, China's energy consumption of GDP unit is 2.2 times higher than the world¡¯s average, 2.3 times higher than the U.S., 8 times higher than in Japan, and even 0.3 times higher than India. In order to maintain stability and promote employment, China needs a large number of jobs, but because of the low level of productive and low population ratio of higher education, China can only introduce and develop large number of labor-intensive industries, develop low value-added manufacturing industries in order to promote employment, which then increases resource consumption and environmental pollution. Although it has been more than 30 years since the reform and opening up, and economic maintains a high degree of continuous development, substantial economic achievements are swallowed up by environmental pollution and the cost of excessive consumption of resources. How to maintain sustainable development has become a great problem in national decision making. And the ultimate solution to this problem is that China must vigorously develop modern services and accelerating industrial upgrading.
Nowadays, the rise in the global wave of services outsourcing provides a significant opportunity for the achievement of China's industrial upgrading. Services Outsourcing to multinational companies is the new form of international services transfer for multinational companies. Within the scope of many international enterprises, in order to seek greater efficiency and lower cost, focus on core business development, they strip out non-core business and deliver to third parties, which are more professional and more cost-effective. According to the inside and outside geographical points undertaking outsourcing, services outsourcing is divided into "domestic outsourcing" and "offshore outsourcing"; according to business fields, it can be divided into information technology outsourcing (ITO) and business process outsourcing (BPO). At present, ITO occupy over 60 percent of the global market share, and BPO market shares nearly 40 percent. In 2007, international services outsourcing has reached 1.2 trillion U.S. dollars, and it will continue to grow at the speed of 30-40 per cent in the next few years. Transfer among international industry has provided us with the good opportunity of excellent industrial upgrading and re-positioning.
China's current choice to vigorously develop service outsourcing as the representative of the modern service industry, and realize industry strategic adjustment, has following advantages and inevitabilities:
First, services outsourcing industry could involve many sectors, and the business scope is very broad, from low-end software testing, human resources agency agents, and middle-end of financial processing, customer service, to the high-end of software development, project management, and packages everything. This feature makes the outsourcing of professional services cover a broad area, and provide more career opportunities, with strong ability to absorb employment. Many of the offshore projects are labor export in essence. Select the development of services outsourcing is fully integrated with China's current situation.
Secondly, in relation to high energy consumption, high pollution manufacturing, service outsourcing industry has high load of information technology, low resource consumption, little environmental pollution and high added value, so it is a very typical green economy and has congenital sustainable development advantages. Take information services as an example, the create value of software export industry is 20 times more than the manufacturing sector, but the energy consumption of unit GDP, is only 20 percent of the traditional manufacturing sector, meaning that if China's software exports accounts 100 million U.S. dollars, it creates the same value as 2 billion U.S. dollars exportation in manufacturing.
Thirdly, from international perspective, vigorously develop the service outsourcing industry can target China's industries from the third tier pyramid upgrade to the second layer, and such target selection is more reasonable and practical.
Because industrial development have certain coherence, only when the manufacturing industry develops to a certain extent, the social labor division will be more refined, and it will generate a lot of professionalism stripping of business and its processes. Today, another major advantage for China to vigorously develop service outsourcing is that it has developed traditional manufacturing industries. While the manufacturing industry in China is attracting international service outsourcing, at the same time, we can use our own advantages in domestic outsourcing development. Therefore, China's service outsourcing industry is facing a double market stack of "Domestic Outsourcing" for domestic demand and the "Offshore Outsourcing" for overseas demand and this advantage are second to none of any other countries and regions. Similarly, only if service industry is well-developed, it can get higher position in the industry.
Domestic services outsourcing industry development has been policy-oriented
In March, 2007, the State Council issued the "Number of Opinions on speeding up the development of the service sector" indicates that it is necessary "to undertake international service outsourcing as the focus of expanding trade in services, take our advantages of rich human resources, and actively undertake information management, data processing, accounting, technical research and development, industrial design and other international service outsourcing business. Qualified coastal regions and cities should study and formulate support policies encouraging service outsourcing undertaking, according to their own advantages, accelerate the development of qualified international groups of service outsourcing companies, form a group of outsourcing industry bases. "Ministry of Commerce implemented a services outsourcing project called "Thousand, Hundred, and Tens". Currently, there¡¯re 14 service outsourcing based cities, 3 services outsourcing models, and a demonstration base for service outsourcing, various aspects of the work is advancing in an orderly manner.
From the list of "service outsourcing based cities" which has been identified, we find that these are almost coastal cities and relatively leading capital cities inland, when these cities are seeking industrial upgrade, they¡¯re bound to gradually transfer some of the productions in original traditional manufacturing fields to relatively backward inland areas, and in this process, we have to guard against possible problems. In fact, the industry positioning and competition among cities within one country have a certain similarities as those among countries worldwide. Developed coastal areas are likely to move those industrial projects of original high pollution, high energy consumption to central and western regions. Therefore, there should be a careful selection when investing in central and western regions; we must uphold scientific concept of development, take the environmental and social benefits into account in the pursuit of GDP growth. I suggest that the state fully draw on the early lessons of coastal areas development for only focusing on GDP; more detailed and strict supervision, as well as control measures should be issued at the macro level, in order to achieve healthy replacement and upgrading of the country's industry in various regions.
