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Buyers accessing services from the Chinese market must also remain sensitive to the issue of recourse. It is important to build in contingencies and understand potential courses of action if, for example, there is an IP breach. This is critical in all outsourcing efforts, but when operating in a foreign legal market it is an imperative.  

The Indian legal system is different than that in the U.S.A., for example, but being based on the English legal system, it is closer to the U.S. model than China’s. Similarly, lessons learned and contingencies defined in the Indian market may or may not apply to the Chinese market.

Outsourcing buyers must also recognize that having contingencies built into a contractual agreement does not mean they are enforceable. Services buyers entering the Chinese market must pose “worst-case” scenarios relative to IP and other sensitive data, and make the decisions as to whether or not they have the risk appetite to expose themselves to the worst case. For these reasons, it is imperative that buyers educate themselves on the prevailing Chinese legal and business environments, and factor those characteristics into their sourcing decision-making process. This includes clearly understanding rules of ownership, recourse options and repatriation issues. Here it is advisable to seek qualified advice and determine when local representation is required, though that local representation may often come from a nonChinese source (e.g., multinational versus local law firm, audit/risk consultancy, sourcing-advisory firm, etc.).

The Chinese market is poised to become a major source as well as destination for business and IT-services outsourcing.

But the market today is still immature, and has different characteristics as compared to other growing outsourcing markets like India. The Chinese services market today is not a viable target for all buyers, particularly those with less outsourcing experience and sophistication or those not actively selling into that market. All users and providers of outsourced business and IT services, however, should minimally begin to educate themselves on Chinese market opportunities that will only grow in size or scope in the coming years.