China eyes service trade for balanced growth

BEIJING - After robust trade in goods over the past decade helped catapult China to become the second largest economy in the world, the country is now looking to its service sector to achieve more balanced growth amid external jitters.

Speaking at the opening ceremony of the first Beijing International Fair for Trade in Service on Monday, Premier Wen Jiabao called for increased opening up in the country's service sector and encouraged local service providers to go global to boost the industry's share in foreign trade.

"Fostering growth in the service sector is the main direction for China's economic transformation and restructuring, as well as an internal call to improve people's living standards," Wen said.

As the first international fair tailored for service trade, the event has attracted more than 22,000 service providers from 82 countries and regions to foster service trade.

The latest emphasis on service trade is part of China's efforts to drive growth in the sector to steady its trade expansion at a time when a slowing domestic economy and weak external demands are hurting demand for China-made products.

"Against the backdrop of intensifying uncertainties and risks of global economic downturns, the development of the service sector and service trade will become the new growth pole for China," said Qiu Hong, assistant commerce minister.

Although huge demands had fueled double-digit growth in the service industry over the past years, its low share in the economic output and a persistent deficit had hurt the sector.

In terms of service trade volume, China now ranks fourth in the world, with $419.1 billion in 2011. But the ratio of the service trade output to total economic output, 43 percent, was still much lower than the 70 percent in most developed countries, Qiu said.

To boost the share of service industry in the economy, China stated in the 12th Five-Year Plan (2011-2015) that it aims to bring the sector's proportion of gross domestic product to 47 percent by 2015 and to make it a strategic focus for the country's industrial restructuring and upgrading to ease reliance on traditional manufacturing.

Since China's entry to the World Trade Organization a decade ago, its foreign trade, mostly trade in goods, had seen torrid growth on the back of cheap material and labor costs. But now with rising costs, China is losing its edge in the traditional manufacturing sector.

"China's trade in goods is mostly in processing, which could easily be transferred to other countries if costs keep rising. In contrast, the service trade has ample room for growth," said Zhou Mi, an analyst with China Academy of International Trade and Economic Cooperation of Ministry of Commerce.

The sector's development plan for 2011-2015 unveiled last year targets an annual expansion of 11 percent during the period, higher than the 10 percent growth in commodities trade, and it also promised wider and deeper access for foreign businesses.

Premier Wen said Monday that China's total import of services will top $1.25 trillion  over the coming 5 years.

While the planned expansion offers growth opportunities for domestic service providers, it also puts them in stiff competition with their foreign counterparts as China's service trade has registered deficits for more than a decade.

In 2010, of the 12 categories of service trades defined by the World Trade Organization, China only reported surplus in construction, with other technology- and knowledge-intensive areas, such as insurance and patent use, all logging billions of US dollars in deficit.

Huang Hai, vice-director of China Association of Trade in Service, said China remains at the lower ends in the international service trade market such as construction, transport and tourism, and in areas of intellectual patents and financials, there is still a big gap with other developed countries.

To catch up, China has been taking steps to push forward cooperation with international service providers, and the hosting of the Beijing fair is expected to facilitate the efforts.

"While using the Beijing fair as a platform for cooperation in the service sector, we also hope to bring in advanced practices and experiences from our foreign counterparts to refine the domestic industry," said Qiu, adding that an underdeveloped service industry will hamper progress in the manufacturing sector.

Hosted by the Ministry of Commerce and the Beijing municipal government, the fair, akin to China's major commodities fair -- Canton Fair -- is an annual event offering a platform for global service buyers and sellers.