Dalian aims to capitalize on global recovery to add to sales, earnings

BEIJING - China's major software outsourcing base, the city of Dalian in the country's northeastern region, aims to increase revenue from its software industry by 30 percent in 2011.

The plan comes amid the central government efforts to continue preferential policies for the software and integrated circuit (IC) industries during the coming years.

Liu Dechun, director of the Dalian Foreign Trade and Economic Cooperation Bureau, said that the recovery of the global economy will be the main driving force for growth.

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"There are signs that the economies of foreign countries are improving, which is good for Dalian as an offshore outsourcing base," said Liu, adding that even in the first half of last year, many software companies in the city were still feeling the impact of the global financial crisis.

The city's offshore outsourcing services earned $900 million last year, while the country's total is expected to hit $15 billion with a year-on-year increase of 50 percent, according to the Ministry of Commerce. Dalian is expected to account for 6 percent of that total, which, Liu said, is the biggest proportion among all the cities in China.

Liu said that Dalian will also increase its efforts in the domestic outsourcing market, which is showing more and more potential as companies and institutions adapt to outsourcing services.

The revenue of Dalian's software industry reached 53.5 billion yuan ($8 billion) last year, with export sales accounting for $1.8 billion, according to the bureau.

However, Liu said that brain drain and competition among cities are still a challenge for Dalian, though it started its outsourcing processes a long time ago.

Between 13 percent and 15 percent of the city's total number of employees in the software industry left their posts last year. Many software companies in China said they are short of workers, said Liu.

"There are 20 cities in China listed as service outsourcing bases, and competition is without doubt increasing. Companies will choose the place offering the best package," said Wang Qiang, deputy-general manager of the Software and Information Service Industrial Center of the consultancy company CCID Consulting.

Earlier this month, the State Council said that the country plans to develop the software and IC industries further by offering support in investment and financing, and with tax cuts.

Liu said that Dalian will continue with preferential policies for software companies, such as subsidies for those that employ recent university graduates.

The revenue of China's software industry exceeded 1.2 trillion yuan in the first 11 months of 2010, a rise of 30 percent compared with the same period in 2009.