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Outsourcing: China V The Rest of Asia

By Jesus David Cano Romano
May 13, 2016
China Sourcing

With a population exceeding 4.5 billion, Asia has the second largest nominal GDP of all continents. China contributes to this as the second largest consumer market in the world so it is unsurprising that an increasing number of businesses now take advantage of its resources, labor and innovative manufacturing in their supply chain when outsourcing. But why does China take the leadership position when businesses outsource its operations to Asia?


Universities in China are becoming increasingly prestigious with more reaching the top end of world ranking tables. 450,000 engineers are graduating every year giving China the advantage of a well educated and skilled workforce which has helped create its lead in the manufacturing industry. In keeping with its economic growth, China has made huge investments in advanced transportation systems, energy supplies and high-speed broadband. When combined with its skilled workforce an effective supply chain is created.


Despite its more superior English language ability, technical software capabilities and faster growth rate compared to China; India’s less developed infrastructures hinder its manufacturing competences. This creates unnecessary complications and manufacturing headaches for western businesses looking to outsource in Asia. Unemployment is also higher in comparison to China meaning a less skilled workforce.


The infrastructure is advantageous and due to its close associations with the way the Americans do business it would be an idealistic candidate to outsource manufacturing. On the other hand its technological resources and skills are nothing compared to that of China’s. Its political risks and higher labor costs also obstruct potential FDI from western businesses due to a higher chance of things going wrong; wasting time and money.


Being the only Southeast Asian nation belonging to OPEC and with the government implementing strategies to improve research and development programmes, Indonesia is becoming an increasingly popular destination for outsourcing. In order to be a successful candidate for outsourcing, the management of a flexible workforce is essential. A disadvantage for Indonesia is that it has the least flexible employment market when compared to other areas of Asia.