China's growing tech industry is unlikely to challenge India's lead in global services outsourcing in the next three to five years, but it should not be ignored.

That is, according to a report from Nasscom--the Indian tech industry association--which looks at the state of the Chinese software and services industry.

Nasscom says the Chinese tech market shares similarities with India in its early years but does not yet offer comparable BPO (business process outsourcing) opportunities.

The report suggests China must overcome a number of challenges before it can represent a real threat to India.

Ameet Nivsarkar, vice president of Nasscom, said these challenges include the fact that, unlike in India, English--the most commonly used language in the global IT industry--is not widely spoken in China.

As well as this, he added, there are very few really significant players in China, with most companies not much larger than 5,000 employees, meaning the infrastructure still needs to develop to compete globally.

But Nivsarkar said that with greater experience, the Chinese industry has the potential to build a significant BPO industry, especially with the strong government-backing the tech industry enjoys.

He added that the Chinese software and services industry is about five years behind India in terms of development.

The software and services sector accounted for 0.5 per cent of China's total GDP in 2006, compared to 5.5 per cent for India.

The Nasscom report suggests the two nations can learn from each other about how to manage education and skills to meet the demands of the industry.

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