The government is to roll out a slew of incentives, including tax rebates and credit support, to boost the nation's services outsourcing industry, a senior official from the Ministry of Commerce said.

"The commerce ministry will work with related government departments such as the Ministry of Finance and the State Administration of Taxation to launch more favorable policies for the services outsourcing industry," Shan Qingjiang, deputy director of the ministry's department of trade in services, said.

Shan was speaking last Thursday at the China International Software and Information Services Summit, a major annual event for the industry.

Ron Machan, chairman and chief executive of BearingPoint Management Consulting Greater China, said: "Government support is indispensable for China to boost the growth of the sector and build itself into a top outsourcing destination."

Already a manufacturing powerhouse, China has been making efforts to boost its services outsourcing sector over recent years in a bid to move up the value chain and boost innovation in the IT sector.

Its offshore outsourcing revenue grew more than 40 percent in 2006 to $1.4 billion, but that still accounts for just 2 percent of the global market.

According to Shan, the government will further encourage multinational companies to set up services outsourcing operations in the nation. They are also welcome to set up joint ventures with Chinese counterparts.

"We will first promote some key regions such as the Yangtze and Pearl river deltas," Shan said.

"Local governments will be encouraged to support major outsourcing companies in those regions."

The Ministry of Commerce launched a pilot project last year to develop 11 bases, including Beijing, Shanghai and Dalian, for services outsourcing across the country. These are expected to attract 100 multinational corporations to transfer part of their outsourcing businesses to China, and create 1,000 large-scale international services outsourcing companies.

Outsourcing companies from around the world have been expanding aggressively in China in recent years, in a bid to tap into its low-cost talent pool and take a slice of the booming IT services market. HP, one of the world's largest IT firms, currently has some 2,700 engineers in China.

Tata Consultancy Services, one of India's most powerful IT outfits, established a new outsourcing joint venture in Beijing with Microsoft and three Chinese partners in February. It expects to increase its headcount in China tenfold to 5,000 by 2010, making it one of the largest players in the country.