Chinese are ready to spend on services for a sustainable growth

One example is the opening of the Shanghai Disney Resort next year, which will have a wider impact than the theme park itself because, in the process of opening such a big complex, many workers will receive training in the service industry.

Apart from the entertainment sector, Orr said great opportunities also exist in sports. "Most sports events in China are still dramatically underdeveloped compared with their international peers.

"The quality of Chinese soccer or basketball may be OK, but does it justify the same price you pay to watch a top quality game in the United States? Perhaps not," he said.

Education is another area of the service sector that can provide opportunities, particularly in adult education and vocational education. As the Chinese economy becomes more competitive and efficient, workers need to continue to be trained in more advanced skills. "Fewer and fewer people will have a job for life. So the education industry is re-equipping people who have worked on production lines, in bank branches, or as blue-collar workers, to play another role and have a brighter future," he said.

Opportunities also exist in the leisure and travel industries, such as hotels, airports and high-quality tourism packages. This will increase growth of private sector leisure travel. Business travel has traditionally dominated the travel sector.

In financial services, Orr said the biggest opportunities may lie in wealth management, as many of China's first generation business executives need advice on managing and sustaining their wealth.

In the face of all these opportunities, Orr sees two challenges that need to be overcome. First, China's service industry still faces a shortage of skilled workers, and also Chinese consumers still need time to learn more about the industry, and gain trust for service providers.

"With services you need to trust the providers－that they will teach you what you need to know, that you will have a nice vacation, that they will provide you with good services. This confidence takes time to build up, and once you reach a tipping point for establishing confidence, it will take off rapidly," Orr said.

And riding on this trend is also the increasing availability of data analysis that allows service providers to efficiently understand consumers and their preferences, which is an important factor aiding this sector's growth, he said.

"There is now so much information, both online and offline, about what different segments of consumers need. Historically, there is a lot more judgment, a lot more learning by doing, but now the service industry is much more data intensive," Orr added.

This information about consumer preferences can either come from direct feedback that consumers provide, or services that Internet and data companies provide to analyze consumer behavior.

"If consumers sign up for location-based services, we can understand where they spend their time, how long they spend looking at something in a store, and if they look at your service online. That means whether they click through and buy it or then go to look at something else," he said.

Orr pointed out that if China successfully transforms its economy so that high-quality services contribute to a higher percentage of GDP, it will enter a new phase of growth. But manufacturing will still remain a crucial part of its economy, although it will become a more efficient type of manufacturing.

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