The China threat

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Thought you were about to lose your job to India? Try China instead.

Australian banks - already saving up to 40% of their back office costs when they choose to offshore some functions to India - may soon be looking to China as an even cheaper source of labour.

All of the country's top five banks - with the notable exception of the Commonwealth Bank - have moved at least some of their functions to India in the past few years, part of a global trend that has generated savings of US$9bn, according to a survey by Deloitte.

Deloitte partner Warren Green says the most common processes to be sourced offshore are IT services, back office processing and credit card processing divisions - but banks are also finding they can access IT skills in India that they cannot in Australia because of the chronic skill shortages at home.

The emergence of China, with a large English-speaking labour force which Deloitte believes could grow to 200 million in the next 10 years, could provide a viable alternative and also help dampen salary inflation among Indian offshoring industry workers.

"Australian companies are primarily offshoring to India, but some banks will be looking at leveraging their investments in China," Green says."

Jim Crowe, managing director of Sydney-based recruitment firm Palmer Holt, agrees that Australian financial institutions will begin to look beyond India in coming years: "Companies are already looking and thinking of the Philippines," he says. "We've seen that with US companies with operations in Hong Kong.

"The cost differential is huge. You are simply not going to be able to keep lowly paid and highly mechanised roles in Australia."