Yesterday, my neighbor asked me whether the economy in China was hurting my outsourcing consulting practice.  My neighbor is a great guy.  He was born and raised in what’s now the Silicon Valley.  His family made their fortune developing, residential properties, which is still his profession.  He has absolutely no business ties to either outsourcing, or China.  I’m sharing this simply to highlight that the economy in China is the subject of what passes for “over the fence” conversations in the Silicon Valley.

Unfortunately, the news doesn’t seem to be good.  I’m hearing that the combination of weakening demand, both domestically and from the west, is starting to impact a number of the outsourcing players.  Last week a former client let me know that they are planning to shrink their team in China.  He recognizes that their resources in Shanghai are a variable cost, and he’s adjusting to accommodate reduced revenue at his U.S. based firm.

Last Friday, VanceInfo (NYSE: VIT) established a new 52-week low when it traded at US$4.28.  As regular readers might remember, VanceInfo’s IPO price was US$8.50, and their stock reached a 52-week high of US$13.98 in May.

Then, this morning, I see this article (sorry, subscription may be required) in the Wall Street Journal:  “Slowdown In China Gets Worse, Increasing Global Woes“.  According to the WSJ:

“Sudden declines in China’s imports and exports show the country’s economic slowdown is entering a new and more serious phase, exacerbating the global slump while jolting Chinese companies and workers used to years of soaring sales and salaries.”

The story continues:

“China’s customs agency said Wednesday that November’s exports fell 2.2% from a year earlier, the first decline since June 2001. That marked a major shift from a 19.2% gain in October and a nearly 26% rise in 2007.

Imports suffered an even steeper drop, down 17.9% in November from a year earlier. They had risen 15.6% in October and more than 20% last year. The import figure signals weakness in domestic consumption, bad news for companies that export to China, and also falling demand for manufacturing components — which spells trouble for China’s future exports as well.”

Yeah, it’s definitely happening fast, and it’s hurting my business.

Technorati Tags:  China, China Outsourcing