SECTORS AND THEMES
Title hereAdditional information in Univers
45 light 12pt on16pt leading
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Credits and authors in Univers 45 light 12 pt on14 pt leading
Offshoring and Outsourcing in Chengdu 2010
kpmgcomcn
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Contents
Preface 3
Chengdu in context 4
Service outsourcing industries in Chengdu 10
Infrastructure and operating costs 18
Human capital 22
Business and living environment 26
Investment in Chengdu 30
Useful contacts in Chengdu 35
KPMG key contacts 37
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 3
Preface
China is undergoing a profound economic shift that it is still largely unknown to many people in the rest of the world In recent years the government has provided strong financial and non-financial support to promote the development of Chinarsquos services industries and to reduce the countries reliance on exports and manufacturing
One area which has seen particularly explosive growth is technology outsourcing and shared services This report features a city that is at the very heart of this dramatic transformation Chengdu is not only one of Chinarsquos largest cities it also has a long academic tradition strong infrastructure links and an enviably relaxed lifestyle These factors have combined to make Chengdu an attractive destination both for investors and for talents including programmers engineers designers and managers
This report aims to provide a full package of the essential information that any company needs to consider before making an investment decision in a new location Supporting this research KPMG China conducted a number of interviews with senior executives of companies already based in Chengdu A key message from those discussions was that Chengdu is now achieving a scale of operations where talent is being drawn from other parts of the country and where thousands of young graduates can see they have an attractive long-term career This is an encouraging sign for companies who also want to map out the best locations for their long-term strategy
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
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- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn 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KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Contents
Preface 3
Chengdu in context 4
Service outsourcing industries in Chengdu 10
Infrastructure and operating costs 18
Human capital 22
Business and living environment 26
Investment in Chengdu 30
Useful contacts in Chengdu 35
KPMG key contacts 37
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 3
Preface
China is undergoing a profound economic shift that it is still largely unknown to many people in the rest of the world In recent years the government has provided strong financial and non-financial support to promote the development of Chinarsquos services industries and to reduce the countries reliance on exports and manufacturing
One area which has seen particularly explosive growth is technology outsourcing and shared services This report features a city that is at the very heart of this dramatic transformation Chengdu is not only one of Chinarsquos largest cities it also has a long academic tradition strong infrastructure links and an enviably relaxed lifestyle These factors have combined to make Chengdu an attractive destination both for investors and for talents including programmers engineers designers and managers
This report aims to provide a full package of the essential information that any company needs to consider before making an investment decision in a new location Supporting this research KPMG China conducted a number of interviews with senior executives of companies already based in Chengdu A key message from those discussions was that Chengdu is now achieving a scale of operations where talent is being drawn from other parts of the country and where thousands of young graduates can see they have an attractive long-term career This is an encouraging sign for companies who also want to map out the best locations for their long-term strategy
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
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- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
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Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Contents
Preface 3
Chengdu in context 4
Service outsourcing industries in Chengdu 10
Infrastructure and operating costs 18
Human capital 22
Business and living environment 26
Investment in Chengdu 30
Useful contacts in Chengdu 35
KPMG key contacts 37
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 3
Preface
China is undergoing a profound economic shift that it is still largely unknown to many people in the rest of the world In recent years the government has provided strong financial and non-financial support to promote the development of Chinarsquos services industries and to reduce the countries reliance on exports and manufacturing
One area which has seen particularly explosive growth is technology outsourcing and shared services This report features a city that is at the very heart of this dramatic transformation Chengdu is not only one of Chinarsquos largest cities it also has a long academic tradition strong infrastructure links and an enviably relaxed lifestyle These factors have combined to make Chengdu an attractive destination both for investors and for talents including programmers engineers designers and managers
This report aims to provide a full package of the essential information that any company needs to consider before making an investment decision in a new location Supporting this research KPMG China conducted a number of interviews with senior executives of companies already based in Chengdu A key message from those discussions was that Chengdu is now achieving a scale of operations where talent is being drawn from other parts of the country and where thousands of young graduates can see they have an attractive long-term career This is an encouraging sign for companies who also want to map out the best locations for their long-term strategy
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
fffffffififilffilf ififfilfffilffililffilffifillfilfifififfillli lfilffilfilfff iiilfilfiliateiateateateiateateiateiateateteiateateateteateateiateiaateiaiaaiaateiateeiateiateaiatetatei aaateateeiia tateiii ateatiateateiateaiateeaiateateaaateaaateateiateeddd wddd wd wd wwiwwd wid wwiddd wdd wd wd wid wid wwwidd iid iwiwwwd ww iwiwiwiwwd wiwdd wwwiwid wwwd wd wd wwwdd wwd wd w withtthtthhthth Kh Kth Kth Khh Kh Kh Kth Kh Kththh Khh KKh Ktth KKKKtttthhhh KKKKKKKKt Khth Ktthtthth KKKKKKKKPMPMPMPMGPMGPMGGMGPMGPMGPMGPMPMPMPMGMGPMGPMGPMPMGMGGMGPP GGPMGMGMGMGMGPM MP MMMMMMGPMGPMGMGGMGMGMGPMPMPM MMMGGMGMPMPMMMMMGGMMMGPMGGP MMMGPMGPMGMMMMGGPPPPP GPMPMMMGPMPMGGPMPPMPMGPM GPMGPPP PMGMM GG
- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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AdAdAdAdAdAdAdAdAAdAAdAdAdAdddvvviiviAAdvAdvdvvvid iAdAdAdAd iAA vviviiAdvvviviviiAdviiAA viiAd vivvvvvv vvvdvvvvivvd v sosorysossssososorsorysoryryryryryysossssosooryrorryryys oororyyryoryryss orysos sss oss ors rssooryororysso yys y ys yys yyyyyy (C(C((C(C(C(C(CCCCC(Ch(Ch(C(Ch(Ch(ChChhhhhh(Ch(CC(CCCCChCCCh(ChhhhCh(C(C(CCChhh(C((Ch(Ch((C(CC hC Ch(C hCCCCC((Ch(Ch(ChCC inininainainanana)na)inaana)a)))inininana)na)ininaa)))inana)ninnana))inin )iinnna)nnn ))nannna)a))a)ainnnaaa)))inn a ))naini )))a ) LLLimLimLimLimLimLimLimimimmmLimLimLimmmmmmLimmLiimimLLimmmmLimmLi mL mmLimm mimL m mL m itediitetedtediteditededdddditediteditediiteiteitedteditedddditeditteitedddiititetedtetetediteeditededitt dteedtedi ededi eeeeee dtedte ddddediteedddddd aaaaa aaaaaaaa aaaaaa aaa aaa aaaaaaa a a a aaa aa a a a aa a aa aa aaa aaaaaa a whwhwhh lwholhwhhwholhwhowhowhowhowhowholwholholwwwhwhowholhowhowholwholwhwhowholwhowhowholh hhwholwholw hhowhoolwhowhowholwhollww w whowhwhwhowholo lwhow hhoh oowholholw 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naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn 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aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 3
Preface
China is undergoing a profound economic shift that it is still largely unknown to many people in the rest of the world In recent years the government has provided strong financial and non-financial support to promote the development of Chinarsquos services industries and to reduce the countries reliance on exports and manufacturing
One area which has seen particularly explosive growth is technology outsourcing and shared services This report features a city that is at the very heart of this dramatic transformation Chengdu is not only one of Chinarsquos largest cities it also has a long academic tradition strong infrastructure links and an enviably relaxed lifestyle These factors have combined to make Chengdu an attractive destination both for investors and for talents including programmers engineers designers and managers
This report aims to provide a full package of the essential information that any company needs to consider before making an investment decision in a new location Supporting this research KPMG China conducted a number of interviews with senior executives of companies already based in Chengdu A key message from those discussions was that Chengdu is now achieving a scale of operations where talent is being drawn from other parts of the country and where thousands of young graduates can see they have an attractive long-term career This is an encouraging sign for companies who also want to map out the best locations for their long-term strategy
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
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- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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AdAdAdAdAdAdAdAdAAdAAdAdAdAdddvvviiviAAdvAdvdvvvid iAdAdAdAd iAA vviviiAdvvviviviiAdviiAA viiAd vivvvvvv vvvdvvvvivvd v sosorysossssososorsorysoryryryryryysossssosooryrorryryys oororyyryoryryss orysos sss oss ors rssooryororysso yys y ys yys yyyyyy (C(C((C(C(C(C(CCCCC(Ch(Ch(C(Ch(Ch(ChChhhhhh(Ch(CC(CCCCChCCCh(ChhhhCh(C(C(CCChhh(C((Ch(Ch((C(CC hC Ch(C hCCCCC((Ch(Ch(ChCC inininainainanana)na)inaana)a)))inininana)na)ininaa)))inana)ninnana))inin )iinnna)nnn ))nannna)a))a)ainnnaaa)))inn a ))naini )))a ) LLLimLimLimLimLimLimLimimimmmLimLimLimmmmmmLimmLiimimLLimmmmLimmLi mL mmLimm mimL m mL m itediitetedtediteditededdddditediteditediiteiteitedteditedddditeditteitedddiititetedtetetediteeditededitt dteedtedi ededi eeeeee dtedte ddddediteedddddd aaaaa aaaaaaaa aaaaaa aaa aaa aaaaaaa a a a aaa aa a a a aa a aa aa aaa aaaaaa a whwhwhh lwholhwhhwholhwhowhowhowhowhowholwholholwwwhwhowholhowhowholwholwhwhowholwhowhowholh hhwholwholw hhowhoolwhowhowholwhollww w whowhwhwhowholo lwhow hhoh oowholholw 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naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 3
Preface
China is undergoing a profound economic shift that it is still largely unknown to many people in the rest of the world In recent years the government has provided strong financial and non-financial support to promote the development of Chinarsquos services industries and to reduce the countries reliance on exports and manufacturing
One area which has seen particularly explosive growth is technology outsourcing and shared services This report features a city that is at the very heart of this dramatic transformation Chengdu is not only one of Chinarsquos largest cities it also has a long academic tradition strong infrastructure links and an enviably relaxed lifestyle These factors have combined to make Chengdu an attractive destination both for investors and for talents including programmers engineers designers and managers
This report aims to provide a full package of the essential information that any company needs to consider before making an investment decision in a new location Supporting this research KPMG China conducted a number of interviews with senior executives of companies already based in Chengdu A key message from those discussions was that Chengdu is now achieving a scale of operations where talent is being drawn from other parts of the country and where thousands of young graduates can see they have an attractive long-term career This is an encouraging sign for companies who also want to map out the best locations for their long-term strategy
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
fffffffififilffilf ififfilfffilffililffilffifillfilfifififfillli lfilffilfilfff iiilfilfiliateiateateateiateateiateiateateteiateateateteateateiateiaateiaiaaiaateiateeiateiateaiatetatei aaateateeiia tateiii ateatiateateiateaiateeaiateateaaateaaateateiateeddd wddd wd wd wwiwwd wid wwiddd wdd wd wd wid wid wwwidd iid iwiwwwd ww iwiwiwiwwd wiwdd wwwiwid wwwd wd wd wwwdd wwd wd w withtthtthhthth Kh Kth Kth Khh Kh Kh Kth Kh Kththh Khh KKh Ktth KKKKtttthhhh KKKKKKKKt Khth Ktthtthth KKKKKKKKPMPMPMPMGPMGPMGGMGPMGPMGPMGPMPMPMPMGMGPMGPMGPMPMGMGGMGPP GGPMGMGMGMGMGPM MP MMMMMMGPMGPMGMGGMGMGMGPMPMPM MMMGGMGMPMPMMMMMGGMMMGPMGGP MMMGPMGPMGMMMMGGPPPPP GPMPMMMGPMPMGGPMPPMPMGPM GPMGPPP PMGMM GG
- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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AdAdAdAdAdAdAdAdAAdAAdAdAdAdddvvviiviAAdvAdvdvvvid iAdAdAdAd iAA vviviiAdvvviviviiAdviiAA viiAd vivvvvvv vvvdvvvvivvd v sosorysossssososorsorysoryryryryryysossssosooryrorryryys oororyyryoryryss orysos sss oss ors rssooryororysso yys y ys yys yyyyyy (C(C((C(C(C(C(CCCCC(Ch(Ch(C(Ch(Ch(ChChhhhhh(Ch(CC(CCCCChCCCh(ChhhhCh(C(C(CCChhh(C((Ch(Ch((C(CC hC Ch(C hCCCCC((Ch(Ch(ChCC inininainainanana)na)inaana)a)))inininana)na)ininaa)))inana)ninnana))inin )iinnna)nnn ))nannna)a))a)ainnnaaa)))inn a ))naini )))a ) LLLimLimLimLimLimLimLimimimmmLimLimLimmmmmmLimmLiimimLLimmmmLimmLi mL mmLimm mimL m mL m itediitetedtediteditededdddditediteditediiteiteitedteditedddditeditteitedddiititetedtetetediteeditededitt dteedtedi ededi eeeeee dtedte ddddediteedddddd aaaaa aaaaaaaa aaaaaa aaa aaa aaaaaaa a a a aaa aa a a a aa a aa aa aaa aaaaaa a whwhwhh lwholhwhhwholhwhowhowhowhowhowholwholholwwwhwhowholhowhowholwholwhwhowholwhowhowholh hhwholwholw hhowhoolwhowhowholwhollww w whowhwhwhowholo lwhow hhoh oowholholw wwhwhooowhoow holwholwhwhwholoowholwholwholwhwhwholwholwhwholwhoowhoholholwwhoowhooow wwwwhowhowhwhowhowhowhowholholwholh ooowholw wholw wwhwhwhohohohoohowhowholholwholwholwwwhowwholhwh owholwww whowholhhhhhholowwwholwhw h hohhooholwhowhwhohhho lll fy flyylyly fy fly fly fly fly fly fly fy fy fly fy fy fly ffy fy fly fy fy flly fyy fy fy flll ylyy ffy ffy fy fly fly fllyy fyyyy fyylylyl ylyy ffly ffy fl y fffylyyyy fly fflyly ffllyly fy fy ffly fly fyly ffy fyyy ororeoreorereoreoreererereioreoreioreioreioreiooreororeoreoreoreioreioreioreiooreroreioreio roreeoreioreioreororerrerererer ereieio oreir eooreo eeooooreieoreioreioreioreieo ereoreeo reee eoreoreeioreioor ggngngngggngngngn ongnn ogn on ogn ognggngnngnnngn ognggggnnnnn ogngg g nnnn ogg gg wnedwnedwnedwnedwnedwnedwnedwnwwnwnwwwn entententententenntenteeeee erprerprerprerperprerrp rrrr iseiseiseiseiseesess in Cin Cin Cn CCCCCCCCCCCCCCin C CCin CCCCCC CCCin CCCCC hhhhihhinhininaininainaininainainanaahhhhh naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Chengdu in context bull City introduction
bull Economy
bull City planning
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
fffffffififilffilf ififfilfffilffililffilffifillfilfifififfillli lfilffilfilfff iiilfilfiliateiateateateiateateiateiateateteiateateateteateateiateiaateiaiaaiaateiateeiateiateaiatetatei aaateateeiia tateiii ateatiateateiateaiateeaiateateaaateaaateateiateeddd wddd wd wd wwiwwd wid wwiddd wdd wd wd wid wid wwwidd iid iwiwwwd ww iwiwiwiwwd wiwdd wwwiwid wwwd wd wd wwwdd wwd wd w withtthtthhthth Kh Kth Kth Khh Kh Kh Kth Kh Kththh Khh KKh Ktth KKKKtttthhhh KKKKKKKKt Khth Ktthtthth KKKKKKKKPMPMPMPMGPMGPMGGMGPMGPMGPMGPMPMPMPMGMGPMGPMGPMPMGMGGMGPP GGPMGMGMGMGMGPM MP MMMMMMGPMGPMGMGGMGMGMGPMPMPM MMMGGMGMPMPMMMMMGGMMMGPMGGP MMMGPMGPMGMMMMGGPPPPP GPMPMMMGPMPMGGPMPPMPMGPM GPMGPPP PMGMM GG
- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 5
City introduction
Chengdu is the capital city of western Chinarsquos Sichuan province
bull Sichuan province lies in the upper reaches of the Yangtze River The inland province is fertile and densely populated with approximately 819 million people in 2009
bull Chengdu is the provincial capital of Sichuan It lies in the Chengdu Plain in central Sichuan and is within a 25 hour flight from Guangzhou Shanghai Beijing and Hong Kong
The fertile Chengdu Plain on which Chengdu is located is historically called Tianfu which literally means ldquothe Land of Abundancerdquo
bull Chengdursquos written history dates back to 311 BC enjoying a rich cultural and historical heritage of over 2300 years
bull Administratively Chengdu covers an area of 12400 km2 made up of nine urban districts six counties and four county-level cities
bull Chengdu had a total population of 129 million in 2009 of which 114 million were urban residents
bull Chengdu has mild winters and pleasant summers free from extreme temperature conditions with an annual average rainfall of 873 to 1265 millimetres and average temperature of 175 degrees Celsius
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
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- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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AdAdAdAdAdAdAdAdAAdAAdAdAdAdddvvviiviAAdvAdvdvvvid iAdAdAdAd iAA vviviiAdvvviviviiAdviiAA viiAd vivvvvvv vvvdvvvvivvd v sosorysossssososorsorysoryryryryryysossssosooryrorryryys oororyyryoryryss orysos sss oss ors rssooryororysso yys y ys yys yyyyyy (C(C((C(C(C(C(CCCCC(Ch(Ch(C(Ch(Ch(ChChhhhhh(Ch(CC(CCCCChCCCh(ChhhhCh(C(C(CCChhh(C((Ch(Ch((C(CC hC Ch(C hCCCCC((Ch(Ch(ChCC inininainainanana)na)inaana)a)))inininana)na)ininaa)))inana)ninnana))inin )iinnna)nnn ))nannna)a))a)ainnnaaa)))inn a ))naini )))a ) LLLimLimLimLimLimLimLimimimmmLimLimLimmmmmmLimmLiimimLLimmmmLimmLi mL mmLimm mimL m mL m itediitetedtediteditededdddditediteditediiteiteitedteditedddditeditteitedddiititetedtetetediteeditededitt dteedtedi ededi eeeeee dtedte ddddediteedddddd aaaaa aaaaaaaa aaaaaa aaa aaa aaaaaaa a a a aaa aa a a a aa a aa aa aaa aaaaaa a whwhwhh lwholhwhhwholhwhowhowhowhowhowholwholholwwwhwhowholhowhowholwholwhwhowholwhowhowholh hhwholwholw hhowhoolwhowhowholwhollww w whowhwhwhowholo lwhow hhoh oowholholw 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naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
6 | Offshoring and Outsourcing in Chengdu 2010
EconomyChengdursquos economy is growing rapidly with a focus on services and manufacturing
bull The real GDP(a) of Chengdu has grown at an average of 139 percent per year from 2005 to 2009 compared with the national average of 114 percent in 2009 GDP per capita in Chengdu amounted to over USD 5123(b) (1)
bull In 2009 the economy comprised of services (contributing 496 percent by value up from 465 percent in 2008) manufacturing and construction (445 percent by value down from 465 percent in 2008) and agriculture (59 percent by value down from 68 percent in 2008) (See Figure 1)
Source (1)Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu City
(2) Statistical Communique of the Peoplersquos Republic of China 2005-2009 National Economic and Social Development issued by Statistical Bureau of China
bull Chengdu continues to be a magnet for foreign investment in China Among the 175 Fortune 500 companies present in Chengdu 139 have foreign investment involved including joint ventures or wholly foreign owned enterprises (WFOEs)
- The pillar industries of Chengdu include information technology automobile aerospace biomedical metallurgy and building materials commerce and trade tourism and financeThese industries have attracted the lionrsquos share of foreign investment
Source Statistical Communique of Chengdu 2005-2009 National Economic and Social Development issued by Statistical Bureau of Chengdu city
Chengdu has a large and growing consumer market
bull Chengdu residents have experienced increasing income levels in recent years urban residents had an average disposable income per capita of over USD 2732 in 2009 87 percent higher than the national average
bull Retail sales reached USD 285 billion in 2009 representing a compound annual growth rate (CAGR) of 182 percent over the 2005 ndash 2009 period(b) (1)
Foreign Direct Investment (FDI) is highly active in Chengdu in recent years
bull In 2009 Chengdu utilised USD 28 billion in FDI with an annual growth rate of 244 percentThe utilised FDI from 2005 to 2009 has been growing at a CAGR of 502 percent each year compared to the national rate of 105 percent (See Figure 2)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms af International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
fffffffififilffilf ififfilfffilffililffilffifillfilfifififfillli lfilffilfilfff iiilfilfiliateiateateateiateateiateiateateteiateateateteateateiateiaateiaiaaiaateiateeiateiateaiatetatei aaateateeiia tateiii ateatiateateiateaiateeaiateateaaateaaateateiateeddd wddd wd wd wwiwwd wid wwiddd wdd wd wd wid wid wwwidd iid iwiwwwd ww iwiwiwiwwd wiwdd wwwiwid wwwd wd wd wwwdd wwd wd w withtthtthhthth Kh Kth Kth Khh Kh Kh Kth Kh Kththh Khh KKh Ktth KKKKtttthhhh KKKKKKKKt Khth Ktthtthth KKKKKKKKPMPMPMPMGPMGPMGGMGPMGPMGPMGPMPMPMPMGMGPMGPMGPMPMGMGGMGPP GGPMGMGMGMGMGPM MP MMMMMMGPMGPMGMGGMGMGMGPMPMPM MMMGGMGMPMPMMMMMGGMMMGPMGGP MMMGPMGPMGMMMMGGPPPPP GPMPMMMGPMPMGGPMPPMPMGPM GPMGPPP PMGMM GG
- Foreign investment in Chengdursquos hi-tech industry has continuously increased since 2007 RampD investment accounted for 53 percent of the total investment in 2007 90 percent in 2008 and 165 percent in 2009
bull Chengdu has successfully attracted major multinational companies to locate operations or representative offices in the city
- In 2010 international companies including General Electric ANZ Bank DellTexas Instruments and Cisco established operations in Chengdu
- In 2009 international companies including Maersk Wipro Accenture and DHL established operations in Chengdu
Note (a) Real GDP is adjusted for inflation and foreign exchange rates (USD 1= CNY68317)
(b) Growth is inflation-adjusted Source (1) Statistical Communique of the Peoplersquos Republic of China 2005-2009
National Economic and Social Development issued by Statistical Bureau of China
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
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nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 7
Major multinationals in Chengdu
Company Industry
Standard Chartered Bank Financial services
Manulife Financial services
DHL Logistics
Maersk Logistics
IBM Information technology
Intel Information technology
BMW Automobile
Toyota Automobile
Bayer Pharmaceutical
Roche Pharmaceutical
PampG Consumer goods
Johnson amp Johnson Consumer goods
Siemens Manufacturing
Lafarge Manufacturing Source Chengdu Municipal Bureau of Commerce
Chengdu is part of the ldquoChengdu-Chongqing Economic Zonerdquo
bull China initialised a national strategy of ldquoWestern Region Developmentrdquo to accelerate the economic development of the vast western region
ndash The central government invested with approximately USD 322 billion between 2000 and 2009 in Chinarsquos western region Another USD 100 billion-plus have been invested in 2010 in 23 new infrastructure projects in the region to boost domestic demand
bull The Chengdu-Chongqing Economic Zone was established with the goal of becoming the regionrsquos strongest economic zone and the next major high-density economic zone in China following theYangtze River Delta Circum-Bohai region and Pearl River Delta regions
ndash The Chengdu-Chongqing Economic Zone which includes 31 districts in Chongqing city and 15 cities in Sichuan province covers an area of 206000km2 and a population of 984 millionThe GDP of the region reached USD 2055 billion in 2008 accounting for 24 percent of western China and 5 percent of the whole country
copy 2copycopycopy 20copycopy 20copycopycopycopy 20copy 20copy 2022copy 20copy 20200copy 20000copy 2copy 2copycopy 20copycopycopycopycopycopy 202000000copy 20copycopy 222000copy 20copy 2copycopy 2copy 2copy 2copy 2copy 20copy 20copy 20copycopycopycopy 20copycopycopycopy 2copy 200copycopy copy 00copy 2copy 2 2000copycopycopycopycopycopy 2copy 20copy 22copy 2222020000copycopycopy 2copy 2copy 20000copycopy 2copycopy 2copy 22202202copycopycopycopycopy copy 2copycopy 2020202000000copycopycopycopy 2copycopycopycopycopycopycopycopy 2copy 222 222000copycopycopycopycopy 2222 220copy copycopy 222200copycopycopycopycopycopycopycopycopycopycopycopycopycopycopycopy 222000000copycopycopycopycopycopycopycopy 2 222 00000copycopycopycopy 2 1010 K10 K1010 K0010 KK10 K100 KK10 K10 K10 KKKKK0 KK10 KKKK10 K00 KKK11 KK K0 KK1011101001 1 KK KK1010 KKKKK101010 K110111011111 K10 KK11111110001111111 0 PPPMPPPPMPMPMGMGMGPMGMMGGMGGPMGPMGPMPPMGMGP MPMGP MGMM GMGPMGMGMGMGGMP GGGGGGGP G AdAdAdAdAdAdAdAdAAdAAdAdAdAdddvvviiviAAdvAdvdvvvid iAdAdAdAd iAA vviviiAdvvviviviiAdviiAA viiAd vivvvvvv vvvdvvvvivvd v sosorysossssososorsorysoryryryryryysossssosooryrorryryys oororyyryoryryss orysos sss oss ors rssooryororysso yys y ys yys yyyyyy (C(C((C(C(C(C(CCCCC(Ch(Ch(C(Ch(Ch(ChChhhhhh(Ch(CC(CCCCChCCCh(ChhhhCh(C(C(CCChhh(C((Ch(Ch((C(CC hC Ch(C hCCCCC((Ch(Ch(ChCC inininainainanana)na)inaana)a)))inininana)na)ininaa)))inana)ninnana))inin )iinnna)nnn ))nannna)a))a)ainnnaaa)))inn a ))naini )))a ) LLLimLimLimLimLimLimLimimimmmLimLimLimmmmmmLimmLiimimLLimmmmLimmLi mL mmLimm mimL m mL m itediitetedtediteditededdddditediteditediiteiteitedteditedddditeditteitedddiititetedtetetediteeditededitt dteedtedi ededi eeeeee dtedte ddddediteedddddd aaaaa aaaaaaaa aaaaaa aaa aaa aaaaaaa a a a aaa aa a a a aa a aa aa aaa aaaaaa a whwhwhh lwholhwhhwholhwhowhowhowhowhowholwholholwwwhwhowholhowhowholwholwhwhowholwhowhowholh hhwholwholw hhowhoolwhowhowholwhollww w whowhwhwhowholo lwhow hhoh oowholholw wwhwhooowhoow holwholwhwhwholoowholwholwholwhwhwholwholwhwholwhoowhoholholwwhoowhooow wwwwhowhowhwhowhowhowhowholholwholh ooowholw wholw wwhwhwhohohohoohowhowholholwholwholwwwhowwholhwh owholwww whowholhhhhhholowwwholwhw h hohhooholwhowhwhohhho lll fy flyylyly fy fly fly fly fly fly fly fy fy fly fy fy fly ffy fy fly fy fy flly fyy fy fy flll ylyy ffy ffy fy fly fly fllyy fyyyy fyylylyl ylyy ffly ffy fl y fffylyyyy fly fflyly ffllyly fy fy ffly fly fyly ffy fyyy ororeoreorereoreoreererereioreoreioreioreioreiooreororeoreoreoreioreioreioreiooreroreioreio roreeoreioreioreororerrerererer ereieio oreir eooreo eeooooreieoreioreioreioreieo ereoreeo reee eoreoreeioreioor ggngngngggngngngn ongnn ogn on ogn ognggngnngnnngn ognggggnnnnn ogngg g nnnn ogg gg wnedwnedwnedwnedwnedwnedwnedwnwwnwnwwwn entententententenntenteeeee erprerprerprerperprerrp rrrr iseiseiseiseiseesess in Cin Cin Cn CCCCCCCCCCCCCCin C CCin CCCCCC CCCin CCCCC hhhhihhinhininaininainaininainainanaahhhhh naninainainanaahhhhhinnanananaaahhhhhhh inannahhhhhinininah nahh nhhhh inininaaaahhhhiinainaaaanahh hi nnnaa ahh ininaahhhhhhh ihh nnhhhhh ini nhhh nnh nn n a andandandandandandndndndandndndndddddndddanandanndandndandddndaannananddanddndanaaaandda da n daan a ma ma ma ma ma ma ma ma ma ma ma mmaa mma maa ma ma maa mma maa mma mmmmmm embeembeembeembeembeembeembembeembebembembeembmbeembeembeembembebeembembembembeembembeembembembembeeembeembeembeembeembeembmembeeee be r fir fir fir fir fir fir fir fir fr fr fir fr fir fir fir fiir fffir fir fiifirr frrrrr rm orm orm orm orm orm orm om orm orm om orm orm orm om orm orm orm ormm oom om om om ooorm ormrm omrmrm f thf tff thf thff thf thf tf thf tf thf ththhfff ththhff thttf thf thththf tf tt hhttthh hthtttff f t hh e KPee KPee KPee Ke KKPe KPe KPKPKPKPe KPKPKPKPe KPe Ke KKPe KPKPKPKKPKPKPKPe KPKPPKe KPKPKKPKPe KPe KPe KK PKPKPKPe KKKK PKPe K PPPKPPPPPKPPPe K Pe Ke KK PPK Pee PPPKK PPPe PPPPPPe KPPPPPPPPMMMMMMGMMMMMGMGMGMGMGMGMGMGGGGMGMGGGGG nnnnG nG nG nMG nMGMG nMGG nMG nMG nnMMMMMMGGMGMGGGG nG nMG nMG nnMMMGGMGGGGMGGGG nnGG nG nG nMGMGGGGGGG nnnG nG nG nMG nMMGGGMGG nnG nMMMMMMMMMMGMGGG nnnG nMMMGGMGG nnMMMMMGGGGG nGG nnnnnnnMMMGMGGG nM GMGMGG nnM MMMMG GMG nnnnnMM GGGG nnnnM MM GMG nnM GMM G GM M GGG GG nnM M n etwoetwoetwoetwoetwoetwoetwoetwoetwoetwotwotwotwotwetwetwtwetwoetwotwoetwotwwotwoetwetwtwoet otwowoetwtwoetettwwoetwetwowowoee ee twttwotwotwooowoeeeeet oetwetwoeet wwwwwoooeeeeeetwetwtt oooooeeeeeeeet owwooee twww oeet woetweeet twww ooootw owww oett wwwwt wwwwowwwwoo rkrk ork ork ork ork ork orrk ork ork orkrk ok okkk ork orkkk orkkrr k f inf inf inf inf inf inf inf innf inf innf innf i nininnninini n nnnnnnf dedepedddepedepeddepeedepedepepedepepedepedepdepddepeeeppp eeeedepdeppeeeeeepeeeeeep eeeeeeepep eeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeppp ddddddddedendededenndenenndedenndenddenndenndenndenndnnnndndendenndenn nndendenn nn dendendennnnnndendenndennnndendendenndendennennn ndennnnn n nnnndedendendennnennnnnn ndededennenennnnnennnenn eeeeeee nnnnenneeeeee nnnnnndnd eeeeeeeeennnnnnt mt mt mt mt mmt mmmt mt mt mt mtt mmet mmemet mt met meet mttt meeemememett meeet mt mt mmt mm eemememeeemmt mt mmt mt mmt mmeememeet mt mt mmemmmemeemmmm mememeettt memmmmeemmmet tt mmmeeeettt mmmmmt mmmmm eeeeetttt mmmmm mmmmee eet mt et mt mtt mmt mmmm em m memeeet mm m e mbbbbbembembbebbbebebebermbemmbbmbembmbbbbbbeb rrmbmbbmbmbembembembembembemmmbebbmbembembembemmbembmbmbbmbebmbbebemberm mmbemmbembebbmbbmbebembeeeerrerrermmbemmmbbmbmbembembebembembembembemberrrmbermbermmbmmmmbbbmbb eembembemberrmberrrm m beeeeeeeembermbermbermberm b eeebembebermbermbermberm mm b eeeeebembemberberm bbbbbmbebeemberbererberberm m bbbbbbbbebeebebebebeberm mmbbbbbebeebermmmmmm b ermmmmm eerm erm b e r fffffffiiififififirfirfirfirfffffiifirfirff rfirfffffffffirfff rfirffffffirfirfffirifirfiirfirffiri ms amsms amsmsms ams ams ams ams ams amsmmmss s ams aaamms as aam s a aams ams aaaaaams aaams aaaaaaaaffffffffffffffififiiilffillffilfffffiiiifffffffffiffilfilffffffffilffffffffifilf fffiffffffffffffiffffffffffff fffffiffilf ffffffilffffffffffffffilfffffffilff f iateiateiateiateiateiateiateateateiateiateiateiateiateiateateiateatet eeiateiateateiat eeeteea eeat eeeeee ddd widddddd wiwid wd wwiwiwwwwwwiwid wd wwiwwwwwwwidd wid wiwiwiwwiwiwiwiwiwwwdd wiwwwiw wwd ww w wiidd wd ww wd wd wwiwd wwwwd wiwiwwwwwwwwwwwwwwww idd w ww ith Kh Kthththhthhthhhththth Kth Kh KKth KKth Kh Kh KKtthtthhhthththhth Kth KKttt hhhh KKKh Kh Khhhh KKth Kh Ktt h hhthh Kh Kh Kh KKtthtth hthh Kth KKKKttt hh Kh Kh hhh KKKttthth Kh Kh KKKt h K Kt Kttth KKh K KKtthth Kh Kh K Ktht h Kt h KKKthhh KKKKKK KPPPPP PMPMPMPMPMPMPMMMMMMGMGPMGPMGPMGGGGGPPPPPMMMPMGPMGMGPMGPPMGP MGPMGGGP MM GPPPMPMGPMGMGGPMGMMPMGPMGGMGGMGPMP MMMGGGGMMMGMGGGGGMGGPPPP M GGMGMGGGGGGGPPP GMGGGGGGGGGG GGPP MMMMMGGGGGPM MMMGGGGGGMMMGGGGGGP MMMGGMGP MMMM GGGGMMM G GM MMMMMM GGGG IIInteI tntentntIntIntIntettIIntetInIn ttInntententeIIntetetetenInteenteeeeeeteeet entInInt eeeenntntnteeeeteetnttetennnntttteennIn ttnttt ennnnnntt eeInnnnt t eeIIInnnnnntt eeeInn nn t natnatnataaatatatttnaataatatattatatrnrnnatnanatatatarnnanattr nnnnnn a aaaatrrrrrnnnn aataatatrrrnarrnnaa trrrrnn naatrrnrrnaaarnn ar aatrnataarnaataatta trnnrnaaatatttttttrnrrnnn tttrnnnaaaat ttiiiionaonaonaonaonaononaononononaonaonaiionaonaononaioonaio nanaiioonaaioiiionaoiiioionaiionaoii aiiio nanaioooiooo a l Col Col Col Col Col CoCoCoCoCl CoCol Cl CCCl CoCol CoCCl CoCCoCoCoCoCoCoCoCCoCll oCC oooooopopopeoppepepeereererropo oopopoperperereropopeeropeeopeeerrero ereropopeopepererrererrrerrropopopeperperopeo pee atatittiitivtivativivivttitativtattivivativatativvat vvvativaaataativaaa tivvvaaaaaativaativ vvv e (ldquo(ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe (ldquoe (ldquoe (ldquoe (ldquoee (ldquoe ((ldquoee (ldquoee (e (((e (e (( KPKKPMGKPKPKPMGKPMGKPMGKKPPPMGPPPPPMGMGPMGPMGMGMGMMGMGMGMGGGGKKKPMGKPMGMGMMGPMGGKKPMGP MMMGPMGPMGPMGPMGPMGKK MPMGKKKKPP M GPMGKPMGK PP MGK GKPPMGGPMGKK PMGGMGGKKKK P MGGGPMGMGGGPMGGGGKK P M G GGGGGP M GGGGGPMGGGGGPMGGGGGGGKKK M GGGGGG IIIIIInIIntIntIntntIInInntIntIntntIIInntIntIntntntntInIntIntIntntIInnInIntIntInnnInInInIntIntIntntnnInIntIntIntntInInIntIntnnInIntntnInnnIIn tInInttnIIntIn eee eernaernaernaernaernernaerneeeeeernarnaernaernaeeernar a tiontiontiontiontiontiontionno alrdquo)alrdquo)alrdquo)alrdquoalrdquo)))lrdquordquo)al a a a a aa SwisSwisSSwiswwwSwisSwisS SwisSwiswSwisS ww s ens ens ens ens ens enene titytitytitytittitytitytitytitytyt yyt Al Al Al AlA AllA l ril ril riril rl ril rirrl rrightghtghtsghtsghtsghtsghtsghghts shg resresresresresssresrese sssrese eeeeee rvrvvvvevveveeveveeeeeeerrrrrrrvvrvvvvveveveerrrrrvvv vee rrv vveee r v eeee rvveeeervvvveeeerr vvv v eerr veee r vrrrrv vv eerrv ee rrrvvvve rrrrrvvvv e d Pd Pd Pd Pddd Pd PPd Pd Pd Pd Pd Pd Pd Pd Pd PPd Pd Pd Pd Pd Pd PPd Pd Pddd P Pd Pdd Pd Pd Pd P rintrintrintrinrintrintintiririntrintrintrintrintrintntntrintrintrintirintttttn tn trintrinrintrinttttr intrr t edededdededed ied ied ied ied iiedededed ied iedd deded ied ied ied ied iededded id iededededdded ied id ied id iidd iiid iiid iid id in Chn Cn Chn Chn Chn Chn Chn Chn ChChChChChChhChhhn Chn Cn CChChChChChChCChn Cn Chnnn CChnn Cn Cnn CCn Cn Cn Cn Cn Cn Cnn n Cn C hnnnn Cnn Cnnnnn hnn Cnnn C hnn C Cnnn Cnnnnnn Cnnnnnn hnn hinainainaininainainainainainainainainainainanainainannainainananan nnnnainai ni ainini
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
8 | Offshoring and Outsourcing in Chengdu 2010
City planning Chengdu emphasises on infrastructure development
bull Since 2007 Chengdursquos government has focused on developing a strong IT infrastructure via seven major projects including implementing an information transmission system with a backbone network an interactive business support system a basic data resource system a data storage and disaster recovery system government information resource directory system a social credit information system and a digital mobile communication system
bull In 2009 Chengdu completed a total investment amounted to USD 217 billion for more than 1200 projects across several categories
bull In 2010 Chengdursquos government has invested more than USD 11 billion in 2010 for 50 basic infrastructure projects and 15 supporting facility projects including the continuous development for the cityrsquos metro system and new airport
Chengdursquos vision is to become a world-class garden city
bull Chengdursquos government has established a plan that envisages Chengdu developing into a world class garden cityTo achieve this goal the city is focusing on
- Developing the cityrsquos modern services and hi-tech sectors into leading industries both nationally and globally
- Maintaining and developing the city as an urban structure that is environmentally sustainable surrounded by beautiful rural scenery and enhanced by modern features that reflect its rich historical and cultural significance
- Developing strategies to retain and attract a talented workforce
bull The Chengdu government has released a four-year development plan on service industries (2008-2012) to address key supporting areas of the service sectors information services which includes service outsourcing is one of the sectors to receive such support
Chengdu Hi-tech Zone is the growth engine for the cityrsquos hi-tech sector
bull Ratified by the State Council in 1991 the Chengdu Hi-tech Zone (CDHT) is one of the countryrsquos earliest state-level hi-tech industrial development zones and one of the six pilot zones established under Chinarsquos Ministry of Science and Technologyrsquos world-class park initiatives
bull With a planned area of 122 km2 CDHT comprises of a south and west park Over 16000 companies are registered in CDHT including over 750 foreign-invested enterprises with a total investment of over USD 57 billion Forty of those companies are Fortune 500 companies including Intel Microsoft Motorola Siemens Nokia Ericsson Corning SonyToyota NEC Carrefour UPS and Alcatel
bull In terms of overall capabilities CDHT ranks fourth among Chinarsquos 55 state-level hi-tech zones and is the fourth most popular hi-tech business area in China CDHT has received 11 national honours for its software and information technology capabilities
bull In 2009 CDHT achieved a GDP of USD 58 billion it has grown by 60 percent compared to GDP in 2008 which was
Source Chengdu Municipal Bureau of Commerce
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
USD 36 billion They represent 63 percent and 88 percent of Chengdu GDP respectively in 2008 and 2009
bull CDHT encourages the development of the cityrsquos hi-tech industry In its south park lies Tianfu Software Park (TFSP) the cluster area in Chengdu for outsourcing enterprises and shared services centres
bull In order to promote the development of CDHT the local government has granted the administrative committee of CDHT high-level economic supervision rights the right to prioritise key infrastructure and industry projects and the responsibility to ensure and supply for key projects
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Service outsourcing industries in Chengdu bull Market size and structure
bull Outsourcing service providers
bull Shared service centres
bull RampD centres
Chengdu plans to construct a market-oriented service outsourcing system and attaches equal importance to the development of both ITO and BPO
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 11
Market size and structure
bull Chengdu is one of the 21 cities approved by Chinarsquos State Council as models of service outsourcing cities Most of these cities are located along the eastern coast while five are in midwest China including Chengdu Chongqing Xirsquoan Changsha and Wuhan
bull Chengdursquos service outsourcing industry was established in 2001 and has developed rapidly since then averaging an annual growth rate of 45 percent
bull In 2008 the software and service outsourcing industries contributed a total revenue of USD 625 billion to Chengdursquos economic growth with offshore revenue accounting for USD 300 million
bull As the first outsourcing service to set up in Chengdu and the first to benefit from the cityrsquos strong development base ITO services make up the largest share of Chengdursquos outsourcing market at 76 percent The marketrsquos remaining share comprises of BPO and KPO both of which have been growing in recent years
bull While the offshore outsourcing market has transformed into a sizeable sector there is room for further development Chengdu provides services to clients in over 40 countries with the US Japan and Europe as its major offshore service destinations accounting for shares of 46 percent 26 percent and 9 percent respectively according to KPMG analysis
bull Chengdursquos major industrial focuses for service outsourcing include Telecommunication amp IT Finance and Digital contents
Breakdown of offshore outsourcing business by destination as of October 2009
US 46 Singapore 5 Hong Kong 2 Japan 26 India 5 Austrlia 2 Europe 9 Taiwan 3 Others 2
Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
12 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing service providers
bull In 2009 Chengdu was home to approximately 600 service outsourcing enterprises including numerous global and local leading service providers who have housed their delivery centres in Chengdu such as Accenture IBM Wipro VanceInfo and NeuSoft
bull As at the end of 2009 36 service outsourcing enterprises in Chengdu were CMM (Capability Maturity Model) CMMI (Capability Maturity Model Integration) certified
bull The table on the right describes the typical characteristics for the different types of commercial service outsourcing providers in Chengdu including IT Oustourcing (ITO) Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO)
Service providers characteristics
Type Detailed sector characteristics
ITO bull Mainly engaged in the areas of software development system integration and IC design
bull The number of ITO companies is the highest among the three types including global and local service providers
BPO bull Mainly composed of local enterprises bull Mainly engaged in basic business process
outsourcing services such as call centres and finance and accounting process
KPO bull Started at an early stage with a number of state owned RampD centres
bull Development is based on strong existing RampD centres established by colleges and universities
bull More national and international RampD centres have recently settled
bull Continues to grow at a fast pace Source Chengdu Municipal Bureau of Commerce KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 13
Case study 1 - Siemens
Finding a solution to multi language IT support
Siemens IT Solutions and Services provides IT outsourcing services to all areas of Siemensrsquo global business and to a growing number of other industrial clients Since 2008 Dr Christoph Fink Vice President for End User Services in Asia Pacific has played a central role in repositioning the business as a distinguished IT outsourcing service provider and has been involved in developing Chengdu as a key IT hub for its Asia business
Globally Siemens IT Solutions and Services posted revenue of EUR 47 billion 2009 with over 75 percent of this originating from clients other than Siemens ldquoWe are a Siemens unit providing end user services data centre services managed network and voice services applications and management servicesrdquo Dr Fink explains ldquoBesides delivering all these services to Siemens we are also providing them to a comprehensive base of internationally-renowned companies so we are playing in the same space as some well established IT service providers Our differentiator is our lengthy experience developing solutions for Siemens across all its lines of business It gives us strong credentials to support other industrial or engineering related businesses We have the industry DNA to set us apartrdquo
As Asia is currently the fastest growing market for IT related services Siemens IT Solutions and Services is continuously strengthening its delivery capability in this geography One of the key requirements for this is to ramp up multi-lingual capabilities for IT support
ldquoWith the increasing focus the last few years towards Asia our clients show rising interest and demand for support capabilities in Mandarin Cantonese Korean and Japanese as the major support language for users based in this geographyrdquo Dr Fink explains ldquoOur facilities in Singapore and Manila just could not offer the pool of human resources to meet this growing need for a mix of language and IT skillsrdquo
The key for Siemens IT Solutions and Services was to find a location for these operations that could be scalable and sustainable ldquoWe narrowed our search to four second-tier cities in China and in late 2009 eventually decided that Chengdu could best meet our needs at a reasonable costrdquo he explains ldquoHaving ruled out other locations in Asia due to cost or lack of scale we also realised that competition for skilled graduates was already getting extremely fierce in other parts of China as well Chengdu was a hot new location and we wanted to come here to seize first mover advantagerdquo
The fact that Siemens already had a representative office in the downtown business district also worked in Chengdursquos favour It was preferable to choose somewhere where Siemens already had a footprint as it made it easier to overcome business licence issues and get assistance with the logistics of setting up For the IT Operations Centre the Tianfu Software Park was the natural choice and based on the very positive experience Siemens has now taken the decision to relocate the representative and sales functions to the park as well
Siemens already has application and software development centres in other cities in China However as its main centre for IT support Chengdu will offer a higher number of positions for IT-literate graduates and young IT professionals In the first six months since opening (in April 2010) the centre has hired 100 staff and expects this to grow steadily to 400 staff by 2012 expanding the location to a global IT operations centre for all IT infrastructure related services
Looking at the challenges ahead Dr Fink recognises that it takes an innovative approach to find people with Japanese and Korean skills although it has not proved insurmountable ldquoChengdu is a big location and it is an attractive place to live so we have succeeded in drawing some of that talent from other cities in the north and east of Chinardquo
Another near-term challenge is that Dr Fink anticipates turning the facility into a 24-hour support centre ldquoAt the moment we are operating in normal business hours but that is something we may need in the future and the Tianfu Software Park is still working to create that environment in terms of supporting facilities transport links security and other services [throughout the night]rdquo he remarks
ldquoDr Fink notes that the high demand for IT professionals is accompanied by the challenge of obtaining the right talent for the organisation Dr Fink feels the Siemens employer brand should be an advantage but he does not underestimate the importance of offering a good career path as well as an attractive salary to retain top talentsrdquo Siemens has been doing business in China for over 130 years so Dr Fink has good reason to be optimistic The opening of its IT Operations facility in Chengdu is yet another landmark in the companyrsquos proud history ldquoldquoThe opening of Chengdu is transforming the scope of our business here in China once againrdquo Dr Fink concludes
(From an interview conducted in November 2010 with Dr Christoph Fink Vice President for End User Services in Asia Pacific Siemens IT Solutions and Services)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
14 | Offshoring and Outsourcing in Chengdu 2010
Shared service centres in Chengdu
bull Since 2007 approximately 20 companies have set up bull Chengdu has reached a level of industry concentration and their shared service centers in Chengdu including both it can be considered as a SSC destination for companies in multinationals and leading Chinese companies the business sectors of logistics financial services and IT
bull The Shared Service Centers (SSC) provide services that expand to the whole corporate value chain from RampD marketing customer services financial accounting and logistics to HR support call centres and IT operations
Major shared sevice centries established in Chengdu
Industry Company Country Services Year of entering
Chengdu
Logistics DHL Germany Finance shared service centre call centre 2009
Logistics Maersk Denmark Customer service centre data processing centre 2009
Logistics Damco Denmark Customer service centre 2009
Logistics SF Express(Hong Kong)
China Logistics distribution centre 2008
Finance Manulife Canada Finance shared service centre 2010
Finance ANZ Bank Australia Chinese language operation centre 2010
Finance Ping An Insurance China Call centre 2008
Finance Taikang Insurance China Insurance back-office service centre 2002
Finance Pacific Insurance China Insurance back-office service centre 2008
Finance China Construction Bank
China Customer service centre 2006
Finance Industrial and Commercial Bank
of China
China Call centre 2006
Finance Agricultural Bank of China
China Customer service centre 2010
Finance China Merchants Bank
China Card centre 2006
Finance China Everbright Bank
China Card centre 2003
Finance Efund China Customer service centre IT shared service centre 2009
IT Newegg US IT shared service centre 2007
IT Amazon US Operation centre 2009
IT Tencent China Customer service centre 2008
Manufacturing Lafarge France Finance shared service centre 2007
Manufacturing General Electric US Finance shared service centre 2010
Manufacturing Siemens Germany IT operation centre 2009
Consumer markets
Yum US Distribution centre 2008
Source Tianfu Solfware Park respective companies website
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 15
Case Study 2 ndash Manulife
The recent arrival
Manulife is a relatively new arrival to Chengdu The global insurance giant chose Chengdu as a location for its second global Shared Services Centre to complement its existing centre in Manila Philippines Locating in China gave the company a chance to diversify operational risks and Tianfu Software Park at Chengdu provided a good mix of incentives including the capacity to meet its growth plans through flexible lease arrangements
The Chengdu centre opened in July 2010 and plans to expand to 2000 staff over the next five years The centre will provide a variety of services to companies within Manulife Financial group including call centre operations accounts payable (AP) and underwriting although to start with it will focus on basic functions such as data capturing ldquoWe want to start with the basics and move step by steprdquo explains Edmond Lee General Manager Manulife Information amp Technologies ldquoIn the financial services sector it is important to build trust and confidence and at the same time we need time to build up talent pool and management capability here in Chengdurdquo
Talent was one of the four considerations for Manulife in choosing Chengdu ldquoWe were looking for a place where there was enough talent to support sustained growthrdquo explains Mr Lee ldquoChina is a place that we donrsquot need to worry about people just developing their competencies
People here have the potential Chinese students have very strong learning abilityrdquo
Manulifersquos Services Centres in Manila and Chengdu work on the same three time shifts allowing them to support Manulifersquos operations globally Mr Lee admits that finding people to work on night shifts is not always easy and the company needs to compensate for this with clear career paths The infrastructure links to the Tianfu Park are also important for people commuting from elsewhere in the city ldquoMetro Line 1 is due to operational by Q3 this year We are looking forward to witness the benefits it will bring to the cityrsquos transportation systemrdquo
Manulife welcomed the favorable polices from the state level and Hi-tech zone level but Mr Lee is keen to put these in perspective ldquoWe need a place that we could have sustainable business environment which means talent pool and friendly government The subsides from government will stop one day so they are not crucial consideration when you have a long term strategyrdquo
More importantly was flexibility and capacity within the Tianfu Software Park to accmmodate the business plan a key benefit in any shared services or outsourcing strategy ldquoSince we are looking at long term development here we were able to negotiate a lease structure that meets our development plan over the five years timeframerdquo Mr Lee adds
(From an interview conducted in August 2010 with Edmond Lee General Manager Manulife Information amp Techologies Services Chengdu)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
16 | Offshoring and Outsourcing in Chengdu 2010
RampD centres
bull Since 2007 more than 20 companies have set up their RampD centres in Chengdu including both multinationals and Chinese market leaders
bull RampD centres in Chengdu are mainly concentrated in IT telecommunication manufacturing and digital content industries
Major RampD centres established in Chengdu
Electronics NEC Japan 2006
Industry Company name Country Year of entering Chengdu
IT Myriad (1) Switzerland 2005
IT SAP Germany 2007
IT Tieto Finland and Sweden 2008
IT Microsoft US 2005
IT Oracle US 2007
IT Symantec US 2007
IT Huawei China 2006
IT Kingsoft China 2007
IT Beyondsoft China 2009
Telecommunication Alcatel-Lucent (2) France 2000
Telecommunication Nokia Siemens Networks Finland 2006
Telecommunication Motorola US 2001
Telecommunication Ericsson Sweden 2004
Telecommunication China Telecom China 2006
Telecommunication China Mobile China 2006
Telecommunication ZTE China 2007
Digital Content Ubisoft France 2008
Digital Content Gameloft France 2004
Digital Content SNDA China 2005
Digital Content Perfect World China 2009
Pharmaceutical Agilent US 2009
Source Chengdu Municipal Bureau of Commerce Tianfu Solfware Park
Note (1) Merged by Esmertec and Purple Labs in 2009 Esmertec established its RampD centre in Chengdu in 2005
(2) Merged by Alcatel and Lucent in 2006 Alcatel established its RampD centre in Chengdu in 2000
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 17
Case study 3 ndash Alcatel
The earliest settler
Alcatel (Chengdu) Communication System Co Ltd is Alcatelrsquos second RampD facility in China -- the other is in the east coastal city Shanghai It provides development design and testing for software and hardware in the telecommunication sector serving clients in China and internationally
The RampD centre at Chengdu started in 2000 with a staff of 20 people The centre grew and survived financial crises in 2001 and 2008 and now has a staff around 300 The RampD centre is looking to keep its steady pace of growth
The deputy general manager Mr Wang has worked in the RampD centre for 10 years and is glad that he has been able to witness the centrersquos growth as well as that of Chengdu ldquoWe have moved our offices in the city three times during our 10 years here from the city center to another area in the Chengdu High-tech Zone (CDHT) and finally to Tianfu Software Park (TFSP) We are one of the first companies to settle in TFSP when it came into operation in 2005 I have witnessed the fast growth of the park I used to see only farms outside my window but now as you can see it is all modern buildings with business giantsrsquo logos on them Also the food court cafe convenience stores and shuttle bus services have helped to solve the daily issues which concerned our staffrdquo
Mr Wang said ldquothese past years the telecommunication sector has been facing financial challengesrdquo He believes that ldquolocating RampD centers in China and India is definitely the trend since these two locations provide lower labour costs and a higher value for the money Chengdu has a proven history of providing talented people in telecommunication and software development This resource of people was able to feed our continuous growth We have people who moved to Shanghai or Beijing and were willing to come back because for similar pay people can have a more comfortable life and more disposable income than in those other cities That is also an advantage in attracting managerial level staff in addition to the Individual Income Tax subsidies provided by the government rdquo
Speaking about the trends in RampD operations Mr Wang pointed out ldquothe single site conceptrdquo He said ldquoOur projects are deployed globally We used to use multi-sites for one project but now we prefer one project at one single site Multi-site implementation needs higher communication costs while the single-site operation enables high efficiency through closer teamwork and a quicker response to the market The RampD talent we recruited locally was able to support our desire to switch our methods
(From an interview conducted in August 2010 with Mr Xianming Wang Deputy General Manager and Mr Jianguo Feng Deputy General Manager from Alcatel (Chengdu) Communication System Co Ltd)
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Infrastructure and operating costs bull Office costs
bull Telecommunication and utility costs
bull Labour costs
Operating costs are a key criteria for selecting office locations Chengdu has maintained its operating cost advantages in comparison with coastal Chinese cities
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 19
Office costs
Construction of office buildings
bull China has land ownership restrictions for foreign companies looking to purchase Land Use Rights (LUR) and construct an office building on certified land Land is accessed by paying a one-time fee to the local government in exchange for a LUR certificate which typically allows 50 years of usage for industrial land
bull According to current regulations in China LUR certificates are obtained through public bidding auctions or public postings of available land
bull Industrial zones have their own price schedules for LUR (actual prices are subject to negotiation with the specific zone)
- The reference price for LUR in the Chengdu Hi-tech Zone is approximately USD 40msup2
- The reference price for LUR in Chengdu Wuhou District and Dujiangyan City is USD 70msup2 and USD 21msup2 respectively
bull Constructing a typical standard office building(1) will cost roughly USD 370msup2 to USD 450msup2
Purchase of office space
bull Foreign companies can purchase office space or pre-built office buildings in Chengdu Standard pre-built office buildings are usually available in the industrial zones
ndash The purchase price range is roughly between USD 1000msup2 and USD 2500msup2 for high-rise office buildings in Chengdu
ndash Enterprises can purchase various standard pre-built office buildings Their purchase price is roughly USD 337 msup2 to USD 468msup2 in the Chengdu Hi-tech Zone
bull Pre-built office buildings are also available for rental within industrial zones
ndash For example the pre-built office buildings at Tianfu Software Park that specifically designed to accommodate IT software RampD and service outsourcing operations are available at a monthly rate of USD 59m2
High-end office buildings
bull High-end office buildings are clustered mainly in the cityrsquos traditional central business district but development has expanded to the south of the city in recent years The cityrsquos government is encouraging the construction of more world-class office buildings to accommodate increasing demand
Monthly rent for existing major office buildings in Chengdu
First City Plaza 12-15 15
Office building Rent (USDm2) Property Management Fees (USDm2)
Western 16-22 17 Federation Mansion
Central Plaza 12-18 16
Source official website of Chengdu Investment Promotion Committee
bull Compared with first tier cities rents for office buildings is lower in Chengdu
Monthly rent for an office building in major cities in China
City Monthly rent for an office building (USDm2 )
Chengdu 13
Shanghai 28
Beijing 35
Guangzhou 23
Source offical website of Jones Lang Lasalle (global commercial real estate services)
Note (1) A three- to six-story steel-reinforced concrete office building depending on number of floors (based on a floor area of 1000 m2 and
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG height of 4-5 m per floor International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
20 | Offshoring and Outsourcing in Chengdu 2010
Telecommunication and utility costs
Telecommunication options in Chengdu bull Telephone options include fixed lines mobile phones and bull Chengdu as the western Chinarsquos telecommunication hub Internet Protocol (IP) services
has an established telecommunication infrastructure
Option Local call National call
International call
Fixed line
003 for the first 3 minutes and 001 thereafter
006 ~ 01
HK Macau Taiwan
03
Others 07 ~ 12
Mobile 006 004 ~ 009
HK Macau Taiwan
013 ~ 057
Others 086 ~ 145
IP Phone
NA 003 + Local call charge
HK Macau Taiwan
022 + Local call charge
USA Canada
035 + Local call charge
Others 053 ~ 067 + Local call charge
Telephone charges (USDminute) in Chengdu
- At present Chengdu has direct cable routes to three major Chinese cities Beijing Shanghai and Guangzhou and has access to eight directions of optical fibre to the rest of western China
- The total bandwidth of Chengdursquos Internet transmission currently reaches 3200G and the existing Metropolitan Area Network (MAN) bandwidth is over 100G By the end of year 2010 the transmission trunk line bandwidth will be over 8000G and the existing MAN bandwidth will be over 450G surpassing the current international standard of 200G
Dalian
Changsha
Wuhan
Shenyang
Xirsquoan
Chongqing
Beijing
Nanjing
Shanghai
TaiwanGuangzhou
Shantou
Chengdu
Foshan
Notes (a) The charges are based on different packages time countries
(b) ldquoLocal callrdquo refers to calls within the city
(c) ldquoNational callrdquo refers to calls from Chengdu to elsewhere in mainland China
Source China mobile China Telecom
bull Various forms of Internet access are available in Chengdu Internet coverage reached 60 percent in Chengdu in
Source official website of Chengdu Investment Promotion Committee 2009
- The annual cost for a Digital Data Network (DDN) with 128 kbps provided by China Telecom is USD 3513 for a local connection (Chengdu city only) and USD 8783 for a national connection
- Broadband network access services such as direct international broadband services Local Area Network (LAN) and Asymmetrical Digital Subscriber Loop (ADSL) are also available
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 21
Energy infrastructure in Chengdu
Professional Range (USD) Average (USD)
Senior managerial staff 2019 ~ 22767 5777
Technical specialists 1479 ~ 10457 3495
Adminstrators 1183 ~ 7200 2491
Service industry employee 1133 ~ 5970 2209
General workers 1148 ~ 6515 2424
2009 Guided Wage Level of Chengdu bull Compared with first-tier cities in China the cost of
electricity and water in Chengdu is relatively low
bull The annual power supply of Chengdu city is 1452 billion kWh Power-supply stability has reached 9989 percent For non-commerical industrial consumers the cost of electricity is about USD 01014kWh For commercial consumers the cost of electricity is about USD 01264 kWh
bull Chengdursquos water quality meets the national standard Source official website of Chengdu Labour and Social Security Bureau
supply (GB57-84) Over 181 million tonnes of tap water are supplied daily
Labour costs in Chengdu have advantages compared to other major cities in China as detailed below Cost of electricity and water in major cities in China
City Cost of electricity (USD kWh)
Cost of water (USDtonne)
Chengdu 01014 067
Shanghai 01259 056
Beijing 01121 091
Salaries for locally hired staff in major cities in China in 2009
City Annual salary (USD)
Chengdu 3992
Shanghai 6263
Beijing 7091 Note Cost of industrial water includes waste-water discharge fees
Source local city government websites
bull Chengdu has been involved in developing new energy technologies such as solar nuclear and wind power in recent years Various industrial enterprises are located to the southwest of Chengdu in Shuangliu CountyThis area is expected to become a new energy base at country level
Labour costs Total cost of employment
bull The total cost of employment includes a basic salary and social welfare benefits such as pension contributions
bull Salaries for locally hired staff in 2009 averaged around USD 3992 per annual Salary ranges were wider for higher-level staff such as senior managerial staff and technical specialists as pay tends to be related to the size and the performance of the company
bull The range and averages for annual salaries (including bonuses) for employees in common job categories in Chengdu in 2009 are as follows
Source Local city labour and Social Security Bureau in each city
Mandatory ldquosocial welfarerdquo benefits are part of total staff costs
bull All enterprises incorporated in Chengdu must contribute to a range of social welfare benefits on behalf of employees including pension unemployment insurance medical insurance injury insurance housing fund and maternity insurance
bull The level of contribution is based on a percentage of an employeersquos salary
Welfare obligations in Chengdu
Composition items of salary
Pension 20
Basic medical insurance premium
65
Unemployment insurance premium
15
Injury insurance premium 04 - 14
Housing fund 6 - 15
Maternity insurance 03
Total 347 - 447 Source official website of Chengdu Labour and Social Security Bureau Chengdu Housing Fund
Administrative Centre
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Human capital bull Workforce overview
bull Education institutions
bull Outsourcing-related training institutes
bull Foreign language level
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 23
Workforce overview
Chengdu has a large workforce
bull As the fifth-most populous city in China Chengdu has a sizable workforce The city boasted more than 7 million employees in 2009 supplemented by 250000 graduates from high schools technical institutes and universities
bull As the capital of Sichuan province Chengdu attracts a large number of high-quality professionals from the province and the whole of western China Each year many professional technology talents and other high-level talents from coastal cities and from overseas bring their expertise and experience to Chengdu
bull There were a total of 150000 employees in Chengdursquos software industry in 2009 with 60 percent of them having undergraduate degrees 17 percent having a masterrsquos degree or higher and the majority working as technology or IT professionals
bull The attrition rate of software industry employees is low estimated at less than 10 percent The rate may be even lower in companies that provide comprehensive training and a consistent corporate culture However the turnover rate may increase in the longer term due to the increasingly competitive job market
Education institutions Forty-two colleges and universities in Chengdu offer more than 160000 graduates bachelor degrees or above
bull Schools in Chengdu and other areas in Sichuan offer majors in computer science finance foreign languages (English Japanese Korean) management medicine and art
bull Sichuan province is home to 92 higher education institutions including colleges and universities
bull As an important education and scientific research centre in western China universities in Chengdu enjoy a sound reputation in IT finance and medical studies
- Four schools were listed among the 72 schools directly managed by Chinarsquos Ministry of Education Sichuan University University of Electronic Science and Technology of China Southwest Jiaotong University and Southwestern University of Finance and Economics
- The school of software engineering in Sichuan University University of Electronic Science and Technology of China are listed as national model software schools in China
bull Training programmes jointly developed by colleges and enterprises have become a major trend in education to ensure future professionals are equipped and ready to become contributing members of the workforce Lenovo IBM and HP have participated in such programmes
Source Chengdu Year Book 2009 official website of Chengdu Government Education KPMG
analysis
Vocational schools in Chengdu supply subject matter labours
bull In 2009 94 vocational schools in Chengdu produced 61000 graduates In 2008 231 percent of graduates employed by Fortune 500 enterprises were from Chengdursquos vocational schools
bull Major subjects available at the vocational schools include computer science foreign languages accounting and e-business programmes
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
24 | Offshoring and Outsourcing in Chengdu 2010
Outsourcing-related training institutes
bull Chengdursquos government supports training for service outsourcing talents by providing subsidies to service outsourcing enterprises and training schools
- The central government provides a training subsidy of over USD 650 for each new-hire graduate of service outsourcing enterprises and Chengdursquos city government provides an additional USD 146 per graduate on top of the training subsidy
bull Following encouragement from the central government Chengdu has seen increasing cooperation between enterprises and schools on training talents in the service outsourcing arena
- The Chengdu Software Talents Training Association was established to facilitate such cooperation
- Electronic Science College together with Microsoft and IBM have set up a number of professional courses while Huawei ZTE and Neusoft have jointly established several student-practice bases to help develop high-quality professionals
bull International outsourcing training institutions have also entered Chengdu
- NIIT (National Institute of Information Technology) and QAI (Quality Assurance Institute) have established training courses in Chengdu in 2009 with major subjects of computing and software
bull In 2009 there were over 100 service outsourcing training schools in Chengdu To regulate the training market the government conducts quality reviews on those schools Fourteen of them have been certified and are detailed in the table on the right
Certified service outsourcing talents training organisations in Chengdu
Training institutions Major subjects
Chengdu University Software
Chengdu University of Information Technology
Software BPO
Sichuan Business Vocational College
Software BPO ITO
Sichuan Guo Xin An Vocational College
BPO
Chengdu Hwadee Information Technology School
Software
University of Electronic Science and Technology of China
Software Computing Telecommunication
Chengdu Winnersoft Software Vocational College
Software
Chengdu Cpsoft Vocational Training Centre
Software
Chengdu Ying Cai Software Training College
Software
Chengdu Neusoft Institute of Information
Computing IT Digital Art Foreign Language
Computer training centre of the Southwest Petroleum University
Software
Chengdu Vocational amp Technical College
Computing Software Electronics Digital Art Foreign Language
Chengdu Finance amp Trade Vocational School
Computing Business English
Source official website of Sichuan Provincial Department of Commerce various training
organizationsrsquo websites KPMG analysis
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 25
Foreign language level
High prevalence rate of English education
bull According to Chinarsquos Ministry of Education in China English courses are to be included in the curriculum beginning in primary school An university graduate normally has 15-years of English training up until graduation
bull In Chengdu the English education market is also active with domestic and international English language professionals offering courses for children students and social workers
Foreign language studies are widely available
bull Education institutes provide language courses and majors in a range of foreign languages including French German Russian Japanese Korean and Thai
Foreign language graduates in Chengdu
School Type The number of foreign language graduates in 2010
Higher Education 12000
Secondary Education 11000
In Total 23000
Source Research Centre of Human Resource Management Southwestern University of Finance
and Economics Chengdu
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Business and living environment bull Business environment
bull Living in Chengdu
Chengdu is one of the main cities in western China It has a long history and a strong traditional culture With increasing levels of foreign trade and investment Chengdu is attracting more foreign investors visitors and residents
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 27
Business environment
International hotel standards
bull There are nearly 6000 hotels in Chengdu including 14 five-star hotels and 27 four-star hotels such as the Sheraton Shangri-la InterContinental Sofitel and Kempinski Another 20 five-star hotels are under construction
bull Five-star and four-star hotels offer a range of facilities including conference facilities ballrooms western-style restaurants gymnasiums and sports facilities
bull The average daily rate for a room is about USD 58 for four-star hotels and USD 117 for five-star hotels with discounts available for longer stays
Local job centres
bull Large companies in Chengdu may have a recruiting engine in first-tier cities targeting talents throughout China or Asia Pacific It is also common for companies to recruit local hires through the Internet head-hunters agencies and newspapers
bull There are 22 employment agencies certified by the Chengdu Labour and Social Security Bureau which are responsible for managing job search registration filing documentation organising communication and interview activities assisting enterprises in completing employment procedures collecting and sharing information and managing labour output
bull Industrial zones also assist in recruiting activities include recruitment headhunting training personnel dispatching and consultancy
Industry association
bull The Chengdu Association of Sourcing Service (CASS) was founded in June 2009 to facilitate the development of service outsourcing in Chengdu It is a non-profit organisation supported by the local government
Foreign banks
bull The State Council listed Chengdu as the financial centre in southwest China as it has the largest number of financial institutions in the region A number of foreign banks have entered Chengdursquos market including HSBC Citibank Standard Chartered Bank ABN AMRO Bank United Overseas Bank JP Morgan Chase Bank Mitsubishi Bank and Nanyang Commercial Bank
Consulates
bull Nearly10 foreign consulates have been set up in Chengdu representing countries such as France Germany Korea Pakistan Singapore Thailand and the US
Exhibition centres
bull Chengdu has three large convention and exhibition centres located in different areas of the city One of them is Century City New International Convention amp Exhibition Centre located in the CDHT It is the newest and largest of the three It was launched in 2007 with an area of 115 kmsup2
bull In 2009 the Century City New International Convention amp Exhibition Centre held the 2009 Western China International Fair which has been playing an important role in western China for trade expansion and investment promotion It will hold the same the event 2010
Transportation
bull Chengdu Shuangliu International Airport is the fourth largest aviation hub in China the largest in western China It currently serves 72 domestic routes including Beijing Shanghai Guangzhou and Shenzhen and 33 international routes to major cities including New York Paris Amsterdam Frankfurt London SydneyTokyo Seoul Bangalore and Manila
bull A new airport is under construction in eastern Chengdu It is due to be in operation by 2012 and will be capable of accommodating five times more passengers than Shuangliu International Airport
Travel by air tofrom Chengdu
Hong Kong 332 25 67
City One way (USD)
Flying time (hours)
Weekly flight frequency (non-stop)
Amsterdam 918~1553 11 7
Bangalore 299 5 2
Shanghai 236 25 147
Beijing 211 25 203
Guangzhou 190 2 147
Notes Economy class prices are for reference only
Source official website of Chengdu Shuangliu Airport
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
28 | Offshoring and Outsourcing in Chengdu 2010
bull As the railway hub of southwest China Chengdu has direct lines to Beijing Shanghai Guangzhou and other China cities
bull Chengdu also boasts a particularly high density of highway networks including city provincial and national highways These routes provide rapid access to other cities
bull Construction of the Chengdu metro began in December 2005 Five lines are being built in the first phase of development covering 126 kilometres (788 miles) and 116 stations Currently Line 1 has been in operation and it links Chengdu downtown and the Chengdu Hi-tech Zone
bull Chengdu has one of the highest numbers of private automobiles in China Residents also enjoy the convenience of taxis and public buses while it is common for companies to provide shuttle services as an additional benefit to employees
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 29
Living in Chengdu
Housing bull Residents planning a long-term stay in Chengdu have
several housing options ranging from rented apartments to serviced rooms Housing is usually found through real estate agencies or the Internet
bull The cost of a two bedroom 100m2 (1076 square feet) apartment is approximately USD 439 per month in 2010
aApartment rent in Chengdu
Two-bedroom apartment type
Average rent per month (USD)
Standard apartment 220
Serviced apartment 512
Luxury apartment 586
Source various property resources
bull The average purchase price for housing in the city ranged from USD 1040msup2 to USD 1464msup2 in 2010
bull Staff accommodation can be provided upon request in industrial zones Those rooms are available for USD 88 per month and can accommodate one to four people Actual prices are subject to negotiation with the specific zone
Healthcare bull Approximately 4053 hospitals and community healthcare
institutions serve residents and visitors of Chengdu 18 of which have obtained the highest national rating of 3A
bull A number of international healthcare organisations and prestigious local hospitals provide high-quality services to foreign residents and visitors Special ldquogreen channelsrdquo and English services are available in those hospitals
bull Healthcare quality and access is another key area that Chengdu is keen to improve The Chengdu International Health City located in western Chengdu is one of the most influential health care industrial parks in China
International schools bull For children of foreign nationals Chengdu has over 10
international schools covering secondary schools primary schools and kindergartens Native English speaking experienced certified teachers are employed These schools were established in cooperation with foreign education organisations in the US and Canada etc and provide standard international courses Students will be awarded with international certifications
Dining shopping leisure and entertainment bull Chengdursquos local cuisine ldquoChuan Cairdquo is one of eight main
cooking styles in China and is well known for its spicy flavour
bull Multinational hypermarket chains including Wal-mart Metro Carrefour IKEA and Decathlon as well as international luxury brands such as Louis Vuitton Gucci and PRADA are all present in Chengdu
bull Pubs clubs gyms golf courses museums parks and places of cultural interest located in and around Chengdu provide plenty of weekend entertainment options for residents and visitors
Landmarks and heritage bull Chengdu is home of the Giant Panda and houses the only
Giant Panda breeding centre in the world which is located north of the city
bull Sichuan operarsquos face-changing or ldquobianlianrdquo in Chinese is an important cultural heritage in China It was invented some 300 years ago and involves performers wearing brightly colored masks and changing the masks within a fraction of a second
bull Chengdu has a history spanning more than 2300 years and has famous cultural relics including Dujiangyan Irrigation System and Du FuThatched Cottage The city also lies along a major historical route where several of the worldrsquos most noted multi-cultural and natural sites such as Jiuzhai Valley Leshan Giant Buddha and Mount Emei have been acknowledged by United Nations Educational Scientific and Cultural Organization (UNESCO) for their historical value
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Investment in Chengdu bull Chengdursquos outsourcing proposition
bull Government policies on outsourcing
bull Investment service
The municipal government of Chengdu has issued favourable policies to attract foreign investors they also provide many convenient facilities and supporting measures to investors within industrial parks
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 31
Chengdursquos outsourcing proposition
Strategic positioning
bull The Chengdu government has formulated a strategy to facilitate the development of outsourcing industry in the city Key details include the following
- Attaching equal importance to the development of both ITO and BPO sectors and encouraging of high value outsourcing services
- Focusing on developing service outsourcing in the areas of information technology digital contents pharmaceutical logistics and finance
- Encouraging the development of BPO segments in data processing data management finance and accounting RampD and industrial design
- Targeting a diversified offshore market ie maintaining the growth in the US and Japanese market while also focus on the development of European and Middle East market taking advantage of its geographical advantages
- Committing to constructing a market-oriented service outsourcing system
- Highlighting Chengdu Hi-tech Zone will be major area to accommodate the service outsourcing related enterprises with neighbouring Shuangliu county providing space for further expansion
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
32 | Offshoring and Outsourcing in Chengdu 2010
Government policies on outsourcing
Chengdu provides favourable policies and funding support for companies to set up and grow in the service outsourcing sector
bull Chengdu provides favourable taxation policies for service outsourcing industries
ndash Income tax on hi-tech enterprises is levied at a reduced rate of 15 percent from the date of their status ratification
ndash Hi-tech companies are exempt from business tax on income obtained from offshore services
ndash Office buildings for the headquarters of newly founded service outsourcing enterprises are entitled to obtain a one-off grant of USD 145m2
bull The local government spends around USD 73 million each year to support the growth of service outsourcing companies in Chengdu in areas including
- Fund support for major enterprises
- Subsidies for talent training
- Subsidies for service outsourcing companies attending overseas business conferences and exhibitions
- Subsidies for organisations that obtain major service outsourcing accreditations such as CMMCMMI ISO20000 ISO27001 and SAS70
bull Chengdu provides further favourable taxation and financing policies for investments in focused industry clusters
ndash Software companies in Chengdu Hi-tech Zone (CDHT) can be exempted from income tax in the first two years of making profit and only have to pay half the income tax for the following three years
ndash CDHT provides subsidies for office rental for software companies with a certain number of employees and preferential land price is offered to software companies that set up a self-built office
ndash Individual income tax payback will be provided to employees with a relatively higher income in CDHT
ndash The finance shared service centre set up in CDHT enjoys the same policies as software companies in principle
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 33
Investment service
Investors can receive assistance to facilitate the investment procedures
bull The municipal government has established the Chengdu Government Affairs Service Centre and Chengdu Foreign Investment Promotion Centre to provide investors with the information and services and help coordination between various departments to minimise the approval time
bull The municipal government has set up VIP service offices for key projects investments and ventures to provide a one-stop and free-of-charge service for enterprises and individuals
bull The Chengdu Hi-tech Zone has also established government affairs service centres in their two business parks ie south park and west park to provide one-stop and free-of-charge service for investors
Registration procedures for establishing Foreign Investment Enterprises (FIEs) in Chengdu (The entire process might take between 17 and 19 working days)
Source Chengdu Municipal Bureau of Commerce
Note The time period that the proceduce might take as follows (1) Immediately (half to one working day) (2) 2 working days (3) 5 working days
y (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG (4) 3-5 working days e (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Offshoring and Outsourcing in Chengdu 2010 | 35
Useful contacts in Chengdu
Contacts of Chengdu government Chengdu Municipal Bureau of Commerce Tel +86 (28) 6188 3700 Website wwwcdmbcgovcn
Chengdu Investment Promotion Commission Email adminchengduinvestgovcn Website wwwchengduinvestgovcn
General Affairs Office Tel +86 (28) 6188 5429
Division of Investment Services Tel +86 (28) 6188 5447
Chengdu Industrial and Commercial Administration Bureau Tel +86 (28) 8539 4114 Website wwwcdgsgovcn
Chengdu Municipal Bureau of Local Taxation Tel +86 (28) 8774 4522 Website wwwcdlocaltaxchengdugovcn
Foreign Affairs Office of the Peoplersquos Government of Chengdu Municipality Tel+86 (28) 8663 7972 Fax+86 (28) 8663 7488 Emailcdfaochengdugovcn Websitewwwcdfaogovcn
Chengdu Public Security Bureau Exit-Entry Administration Department Tel+86 (28) 8640 7364
Chengdu Customs District Peoplersquos Republic of China Tel+86 (28) 8640 1114 Websitechengducustomsgovcn
Internet links Sichuan Government ldquoWindowrdquo wwwscgovcn
Chengdu Government ldquoWindowrdquo wwwchengdugovcn
Chengdu Foreign Investors wwwinvestchengdugovcn
Chengdu Hi-tech Industrial Development Zone Chengdu Hitech Zone (CDHT) Tel+86 (28) 8513 8544 Website wwwcdhtgovcn
Tianfu Software Park Tel+86 (28) 8533 0986 2691 Email Salestianfusoftwareparkcom Website wwwtianfusoftwareparkcom
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
wned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG All rights reserved Printed in China
Offshoring and Outsourcing in Chengdu 2010 | 37
KPMG key contacts
Edwin Fung Partner in charge Markets KPMG China Tel +86 (10) 8508 7032 edwinfungkpmgcom
Thomas Stanley COO Global China Practice KPMG China Tel +86 (21) 2212 3884 thomasstanleykpmgcom
Jacky Muk Senior Partner Chengdu KPMG China Tel +86 (288) 673 3966 jackymukkpmgcom
Ning Wright Partner in Charge China Sourcing Advisory KPMG China Tel +86 (21) 2212 3602 ningwrightkpmgcom
Alan Fung Partner China Sourcing Advisory KPMG China Tel +86 (21) 2212 3250 alanfungkpmgcom
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010
Beijing 8th Floor Tower E2 Oriental Plaza1 East Chang An AvenueBeijing 100738 China Tel +86 (10) 8508 5000Fax +86 (10) 8518 5111
Nanjing 46th Floor Zhujiang No1 Plaza1 Zhujiang RoadNanjing 210008 ChinaTel +86 (25) 8691 2888Fax +86 (25) 8691 2828
Xiamen 12th Floor International Plaza8 Lujiang RoadXiamen 361001 ChinaTel +86 (592) 2150 888Fax +86 (592) 2150 999
Shenzhen 9th Floor China Resources Building 5001 Shennan East RoadShenzhen 518001 ChinaTel +86 (755) 2547 1000Fax +86 (755) 8266 8930
Macau 24th Floor BampC Bank of China BuildingAvenida Doutor Mario Soares MacauTel +853 2878 1092Fax +853 2878 1096
kpmgcomcn
Shanghai 50th Floor Plaza 66 1266 Nanjing West RoadShanghai 200040 ChinaTel +86 (21) 2212 2888Fax +86 (21) 6288 1889
Hangzhou 8th Floor West Tower Julong Building9 Hangda RoadHangzhou 310007 ChinaTel +86 (571) 2803 8000Fax +86 (571) 2803 8111
Qingdao 4th Floor Inter Royal Building 15 Donghai West RoadQingdao 266071 ChinaTel +86 (532) 8907 1688Fax +86 (532) 8907 1689
Chengdu 18th Floor Tower 1 Plaza Central 8 Shuncheng AvenueChengdu 610016 ChinaTel +86 (28) 8673 3888Fax +86 (28) 8673 3838
Shenyang 27th Floor Tower E Fortune Plaza 59 Beizhan RoadShenyang 110013 ChinaTel +86 (24) 3128 3888Fax +86 (24) 3128 3899
Fuzhou 25th Floor Fujian BOC Building136 Wu Si RoadFuzhou 350003 ChinaTel +86 (591) 8833 1000Fax +86 (591) 8833 1188
Guangzhou 38th Floor Teem Tower 208 Tianhe RoadGuangzhou 510620 ChinaTel +86 (20) 3813 8000Fax +86 (20) 3813 7000
Hong Kong 8th Floor Princersquos Building 10 Chater RoadCentral Hong KongTel +852 2522 6022Fax +852 2845 2588
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation
copy 2010 KPMG Advisory (China) Limited a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity All rights reserved Printed in China
KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (ldquoKPMG Internationalrdquo) a Swiss entity
Publication number CN-PampT10-0001
Publication date November 2010