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Does it make sense to consider setting up a shared service center (SSC) in China without a robust business case? Often the initial business case does not appear compelling. In the short-term, setting up an SSC may result in increased costs, rather than delivering immediate cost savings.

China’s ambition to become a more service-oriented economy was initially mentioned in 2006 as part of the 11th Five-Year Plan (2006-2010). Since 2006, China’s Ministry of Commerce has provided increased support to the service sector, including shared services and outsourcing activities, and continued to support this path in the 12th Five-Year Plan 2011-2015. Since 2006, the government has designated over 20 cities as ‘outsourcing centers’ across China.

Shared services can provide a multitude of strategic benefits over the longer-term. Many companies (including KPMG China) have indeed reached this conclusion, and moved to set up an SSC in China; companies are establishing SSCs in China to not only serve Chinese and north Asian operations, but also support global operations.

This month’s China 360 will examine the value proposition of SSCs, as well as practical considerations that should be included when assessing the merits of an SSC in China. In addition, insight will be provided on how to develop a strong business case.

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