The IT-BPO industry in China is still in its early phase of evolution but it has the potential to develop a large IT-BPO industry," the study on 'Tracing China's IT Software Services Industry Evolution' by industry body Nasscom.

China could overtake India as the most preferred outsourcing destination in the next 3-5 years on the back of an educated workforce coupled with strong government emphasis on IT-BPO sector, according to a study. The software and services revenues in China is estimated to grow at 22 per cent to reach 28 billion dollar by 2010 including domestic market at over 20 billion dollar, the study said.

China has recorded 12.3 billion dollar of revenues in this sector in 2006 India's IT software and services revenues are likely to reach $50 billion in 2007-08, according to Nasscom. The current industry landscape in China bears some resemblance to earlier years of Indian IT-BPO industry but systemic weaknesses and comparatively evolved demand and competitive environments are some of the challenges.

Indian IT-BPO exports are mainly serving the US and the UK markets, which together account for over 80 per cent of the total exports. On the other hand, China's key export market areas are Japan and Korea, where it has certain inherent linguistic/cultural advantages, the survey noted.