China’s outsourcing market up to £41bn by year end

The HR outsourcing market in China is expected to be worth more than £41bn at the end of this year, according to a new study.

Outsourcing provider EquaTerra said the Chinese market was experiencing rapid growth and would expand by at least 25% by the end of 2009. Five years ago, the market was valued at only £8bn.

EquaTerra spoke to 15 leading China-based HR directors of foreign businesses. They cited several reasons for not outsourcing HR to China, including concerns about data security and loss of management control.

But they acknowledged that a significant proportion of HR administration functions would be outsourced in the next three to five years, with payroll and recruitment leading the way.

However, the report warned that China still does not have enough skilled manpower to meet the growing demands of the HR outsourcing market.

EquaTerra said this would lead to wage acceleration for providers, margin erosion and talent shortages.

"Ultimately, the dominant players will be those companies that can obtain and retain quality delivery people," the report said.

To read the full report, download the Human Resources Outsourcing in China pdf