Dinesh Kumar Patnaik, head of the Commercial Division of the Indian Embassy, said all of India's large software companies are planning to start businesses in China.

"Following the big companies' steps, more and more Indian software firms will come in herds," he said in an interview with China Daily.

Satyam, a leading Indian software company, recently opened an office in Shanghai. TCS, Infosys and Wipro -- other big Indian software names -- are all busily preparing their Chinese offices.

China excels at hardware production, and India could help manufacture complementing software, he said.

"With the combination of the best hardware and software, both countries will win," the Indian official said.

"Chinese software makers could gain technology and management experience from their Indian counterparts to advance faster," Patnaik said.

Many Indian software training centres are also planning to open engineer training schools in China.

"China needs at least 120,000 entry-level software engineers per year, yet less than 60,000 are available at present," he said.

With more entry-level software engineers, or the so-called "software blue-collars," China's software industry will catch up with world standards faster, according to the official.

The development of China's information technology industry is quite unbalanced with the software sector only one-fifth the size of the hardware side, according to the Ministry of Information Industry (MII).

China has many software companies, yet most of them are small in size with less than 50 employees, the MII said.

Domestic software companies are feeling the heavy pressure from their Indian peers.

Compared with other big software makers, Indian companies are more flexible in making specialized goods, especially in designing management solutions for industries.

Furthermore, since labour is also relatively cheap in India, China loses its comparative advantage in that respect.

An executive at Kingsoft, one of the country's leading software firms, said the strengths of Indian companies lie in their research and development capabilities, high efficiency and rich experience in providing specialized software solutions, which domestic companies are less experienced in.

China's software development level lags behind that of India. Of the world's 58 software institutes that satisfy the demand of CMM5, or the fifth grade of Capability of Maturity Model for software which measures the development ability of software makers, 32 are in India while China has none.

After 10 years of booming development, India has grown into the world's No 2 software industry with an annual output capacity of US$55 billion and earned US$8.1 billion from software exports last year to 102 countries and regions, according to figures provided by the Indian Government.

The Indian would like to help the development of China's software industry, Patnaik said.

Indian software companies quietly started to penetrate the Chinese market years ago with many engineers taking part in the software development of China's telecoms, aviation, textile, transportation and financial industries.

(China Daily February 7, 2002)