China will exempt offshore service outsourcing firms in 21 cities from business taxes from July 1, 2010 until December 31, 2013 to boost the industry's development, said the Ministry of Finance.

The Ministry of Finance, the State Administration of Taxation and the Ministry of Commerce (MOFCOM) jointly issued the notice on August 11.

Firms specializing in information technology outsourcing, business process outsourcing and knowledge process outsourcing in 21 Chinese cities, including Beijing, Shanghai, Dalian in Liaoning Province and Shenzhen in Guangdong Province, will be eligible for operating tax exemption, said the notice.

China is currently the world's second largest outsourcing market of such services, after India. The country inked outsourcing contracts worth up to $20 billion in 2009, up 185.6 percent, according to data from the Ministry of Commerce.