Surprise Winners of the China/India Outsourcing War

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Because the yuan is pegged to the dollar, Chinese outsourcing becomes cheaper as the U.S. dollar falls. It’s this dollar-based competitive advantage that has provoked Indian companies to slash costs and profit margins to remain competitive, especially in the tech sector. And Chinese companies now have responded by ramping up efforts to steal more business from Indian companies.

If you look closely, you can actually see the battle brewing with your own eyes simply by skimming the back pages of the financial section. There you’ll see Indian companies rushing to buy stakes in Chinese companies, while Chinese companies are countering the move by spending nearly $35 billion in M&A activity — all in hopes of grabbing a bigger piece of the outsourcing pie.

This virtual outsourcing arms race will put powerful upward pressure on the stock prices of companies that give U.S. and European companies what they want faster, better and cheaper than the competition.

Here are five companies poised to prevail in this global battle for customers and profits.

Next — Chinese Stock #1