Thursday April 21, 2005

Can China outsourcing overtake India?

- What is Mr Lowem doing reading Indian news? Well, you never know what you might find ...

indiadaily.com :

China is eager to take control of the worldwide lucrative business process outsourcing and offshore IT projects. Tha's the gold of export revenue. China understands that in twenty years, they will be lagging behind India badly unless they can turn it around now.

[my notes : actually in 5 years or less, the effects of peak oil will be making things "a lot more interesting" than that]

China is excellent in manufacturing and utilizing low cost Chinese labors sometimes in subhuman conditions. But in the long run America and Europe will replace Chinese labors by fully automated robots and nothing can be cheaper than that. The next phase of manufacturing revolution is introduction of intelligent robots in massive scale. Japan will excel there and the factories will start moving back to America and Europe where qualified workers are available and the backlash from local consumers are gone.

China understands the new Robot wave of manufacturing. They are panicked and want really to get into Business Process Outsourcing and offshore IT projects. This part of the export business cannot be replaced by Robots in the next thirty years, Now the million-dollar question is how can they do it?

For Business Process Outsourcing, you need two things. A Government ready to provide the infrastructure and flexible policies towards international companies. The second component is an English speaking elite middleclass that is well educated and intelligent to perform high-end white-collar jobs. China and India both have the first component. What China really lacks is the second component. They just do not have the English speaking elite middleclass that is well educated and intelligent to perform high-end white-collar service jobs helping the Western companies. It will take more than seventy five years for China to build that capability. It was a mistake for the Chinese to avoid English and not spreading higher education to all in the country. India must thank Late Pandit Nehru and Indira Gandhi for that far sight. No one understood why India took money from starving farmers in fifties and sixties to develop and focus on engineering and medical universities all over the country and make higher education free for all students in the country.

My notes :

1. China is trying desperately to catch up on the English part. Lots of English classes springing up over there. But yes, it does take years. You don't get widespread English proficiency in a large nation overnight. 75 years may or may not be right (also see peak oil note above).

2. I wouldn't put "elite" and "middle-class" together in the same phrase. The real elite are the Rockefellers and the Rothschilds of the world.

3. Inflation due to USD flooding the China and India economies will lead to rising prices, while making the Americans poorer (due to currency devaluation). An equilibrium will be reached somewhere. The outsourcing trend will not "grow forever".

(2005-04-21 10:49:33 SGT) [Biz] Permalink

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