Another joint-venture, called Hengtian, of which Bob Williams is chairman, was set up with the publicly listed Insigma group in 2007. Insigma is a diverse Chinese company spanning engineering, cell phone games and IT outsourcing businesses. Hengtian provides IT outsourcing, specialising in financial services, with State Street making up about 40 per cent of its revenue. There are about 70 mutual fund companies in China, which manage between US$400-$500 billion in total. The top 10 also have Hong Kong subsidiaries to capture international inflows. They run on internal administration systems and, until SSHZ came along, one main local systems supplier for support. The fund companies are either state-owned enterprises, such as the largest, China Asset Management Company, or privately owned by Chinese interests or with a mixture of Chinese and foreign shareholders. Other Western systems providers have been thinking about the possibilities in China too.
Sungard, the big US software company, has a Chinese operation with about 80 staff busily working on making some of its systems accessible to Chinese companies, with a launch scheduled for late this year or early next year. The big growth market at the moment is in funds with Qualified Domestic Institutional Investor status, which are those through which Chinese citizens can buy overseas assets. The demand is putting pressure on systems. When it comes to Chinese assets, the door may be opened to foreign organisations down the track. At the moment, in asset servicing, the Chinese financial institutions are not permitted to have the information on local assets hosted or stored offshore. Whether or not Chinese institutions are going to be predisposed to outsourcing parts of their administration is another question. Cristoforo believes they will look at the value proposition in exactly the same way that Western organisations do.
He does not believe there is any cultural impediment to outsourcing, although there is a fair body of anecdotal evidence from other industries to the contrary. The stereotype – right or wrong – is that the Chinese are happy to enter into contracts with foreign companies to gather the manufacturing or other expertise they need so they can go it alone. They then say: xie xie very much. In some industries, the Chinese have scale – and lots of it. In financial services this is not yet the case. And the Chinese are very practical. They also put great store on the value of long-term relationships, which can often be frustrating for impatient foreigners. Cristoforo says: “In my experience the Chinese are not against outsourcing. I have learned from my Chinese business associates an important aspect of the culture that can be best summarized in the saying: ‘Tian Shi Di Li Ren He’, which, literally, means ‘timing, condition, and partner’.