Outsourcing in China: An exploratory assessment

The increasing demands for public services, growing resource externalisation and decentralisation have driven Chinese governments to seek alternative means of service delivery. This article addresses the largely ignored outsourcing practice in China. Lack of awareness of and research on the widespread outsourcing was a result of the conceptual barriers created by China's economic transition and its choice of incremental reform path. By decomposing national fiscal expenditures, the article finds that from 2002 to 2004, outsourcing accounted for about one-third of the total governmental services expenditures and demonstrated a trend of continuous growth. Such developments effectively transformed the basic landscape of public service delivery and created significant external dependence. Within just three decades, China has quickly shifted from an omnipotent state to an 'incomplete' state. The capacity of the administrative hierarchy has become severely constrained. Nonetheless, the political risks of the macro-level transformation are largely mitigated at the micro-level by mechanisms of public-private cooperation. These developments are embedded in informal arrangements that, remarkably, maintain the survival of the current power structure. Copyright (c) 2008 John Wiley & Sons, Ltd.