China now is one of the most important places where software outsourcing businesses are flourishing. However, the subcontracting in the current software outsourcing practices has not received enough attentions. This research attempts to further the understanding on this issue. Mixed empirical research approaches were used to explore the extent and the impacts of the outsourcing subcontracting. The findings suggest the subcontracting widely exists in current China outsourcing industry. Its major enabling factors were also identified. While subcontracting provides the industry with specialized services as well as organizational and managerial flexibility in a low cost way, it also introduces some negative influences. Four future trends are also addressed in this paper.