CHINESE companies engaged in services outsourcing should switch their focus to the domestic market for new opportunities and enhance their level of service capabilities to stay competitive as external demand shrinks, participants at the Global IT Outsourcing Summit said yesterday.

"A deteriorating economic outlook in the eurozone and the United States will soon lead to a cutback in new orders for Chinese services outsourcing companies," said Norman Sze, managing partner of Deloitte Consulting China. "These companies should look for new opportunities and the Chinese market will be a good choice."

Liu Ming, vice president of Shanghai-based Venus Software Co, said his company is now studying the potential of the Chinese market although most of the outsourcing services it provides still cater to overseas clients.

Outsourcing, which has grown into a trillion-dollar business over the past few years, subcontracts a certain process of production, such as designing, packaging, or information management, to a third-party company.

In China over 70 percent of services outsourcing are from companies based overseas and if the global economic outlook turns sour they will be extremely cost conscious.

Although Chinese firms still have a price competitive advantage they risk losing it.

"With the yuan continuing to appreciate we are gradually losing that strength,'' Yan Tianfang, vice president at Shanghai Newtouch Software Co, said.

He said one solution is to be more competitive by investing funds in upgrading services offered and training personnel.

The two-day summit opened yesterday with the theme of "Smart City, New Opportunity."