China has overtaken India as the destination of choice for outsourcing and shared services according to a survey conducted by CFO Innovation for KPMG China.

The online survey asked 286 finance directors, financial controllers, CEOs, chief financial officers and senior executives their preferred location for outsourcing and shared services.

A surprising 42 percent of respondents cited China as the destination of choice for shared services followed by Singapore, India, Hong Kong and the Philippines. For outsourcing services, China also topped the list at 41 percent followed by India, Singapore, Hong Kong, Malaysia and the Philippines.

Language capabilities and low labor costs were cited as two of the major considerations for choosing a location. Infrastructure and world-class skills and expertise were also mentioned as deciding factors.

According to the report, while China’s outsourcing industry has not reached the level of maturity seen in India there is huge potential because of so many Chinese cities wanting to attract investment.

China’s onshore and offshore outsourcing market already reached US$20 billion in 2009 based on figures released by the Ministry of Commerce. KPMG forecasts that the industry may amount to US$43.9 billion by 2014.

Most of the respondents were based in China or Hong Kong, with 26 percent located on the mainland and 27 percent located in Hong Kong. Of the remaining respondents, Singapore accounted for 25 percent while Malaysia represented 11 percent and the Philippines and Indonesia accounted for 2 percent each. Only 1 percent of respondents were located in India.