Ministries redouble focus on services

Sector has driven economy since 2012, but reform needed to match global importance

China's newly issued guideline for the development of the trade in the services sector is expected to help bring it in line with the information age and widen market access, boosting high-quality growth.

On Oct 27, in coordination with 23 other ministries, the Ministry of Commerce released a plan setting out goals for the development of the sector during the 14th Five-Year Plan (2021-25). It takes into account new developments and issues facing trade in services during the period.

According to the World Trade Organization, trade in services refers to the sale and delivery of intangible products like transportation, tourism, telecommunications, advertising, computing and accounting, among others.

The leading role of greater reform and opening up is given prominence in the new plan, which makes clear that deepening reform and opening up will be prioritized. Efforts in this regard will include widening market access for services, improving the cross-border trade in services, and building a platform to enable higher quality opening up.

Experts believe that a healthier, more robust growth of trade in services is critical to China's economic transition and sustainable growth, particularly as globalization has slowed since the world became preoccupied with the COVID-19 pandemic.

Noting that China's services sector has driven the country's economic growth since 2012, Guo Meixin, researcher at the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University, whose focus of research is China's trade relations, said that stronger, healthier growth for the country's services sector is necessary for high-quality development and the transition toward a low-carbon economy, and that China has plenty of room to grow in this respect.

"Compared with the trade in goods, China's trade in services has long remained in deficit and is currently smaller in volume. Widening the scope of opening up not only requires efforts to lower barriers in the real economy, but also needs broader market opening. This will not only be conducive to upgrading trade in services, but will also help generate more job opportunities in the service sector," she said.

One highlight of the new guideline is that for the first time, digitalization was included as a development goal for the growth of the sector as the country has reached a new stage of development, and reliance on the internet to spur demand for trade in services is on the rise.

Guo believes that digitalization not only offers China a key means of overtaking other countries in economic growth, but also helps improve government service efficiency and public satisfaction.

The guideline noted the importance of reform and broader market access for all players. In particular, efforts will be made to issue and improve negative lists for the cross-border trade in services.

China's first such list came into effect in the Hainan Free Trade Port in August, and proposed special management measures for foreign providers offering services in cross-border settings. Areas addressed included national treatment, market access, local presence and cross-border financial services trade.

"The content of the new plan is aligned with the national goal of high quality growth and in particular, echoes the new context, which is digitalization," said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation. "In mapping out a clear picture of development across sectors, the plan will provide guidance on cooperation and synergy across departments, which is conducive to nurturing the stable, sustainable growth of trade in services."

Zhou believes that the demand-driven fast growth of technology has helped the sector better cater to market needs, and that enterprises will now be able to shift their focus to the services that they provide.

"And as the key to economic transition is about the allocation of productive factors, a more advanced growth of trade in services will be important to conventional manufacturing businesses in leveraging strength and capturing new opportunities and overall to improving China's quality of growth," he said.

Last year, China's trade in services dropped 15.7 percent year-on-year to 4.56 trillion yuan ($707 billion) mostly due to the effects of the pandemic on tourism, but the service trade deficit continues to narrow, according to the Ministry of Commerce.

Guo believes that uneven growth across sectors is also a prominent issue facing the sector.

"Statistics show that there is an imbalance in the structure of China's trade in services, as tourism and transportation now account for about half of the trade volume," she said.

"The share of knowledge-intensive services in China's total service value-added exports is increasing, but the share of foreign content remains high, at over 30 percent. Much effort is needed to drive its growth to enable the sector to grow in a healthier, more sustainable manner."