A State Council document released Wednesday indicated that the services sector should speed up its growth whilst allowing more investment from private and foreign sources.

 

Sectors including telecommunications, railways and civil aviation, which remain largely state-owned, will be opened up to foster increased competition emerging from a wider bracket of investment sources, the document read. 

 

The document specified that China’s market access system would be "open, fair and rule-based", which further appealed local authorities to welcome foreign investment and improve the sector’s legal bases.

 

Further encouragement was targeted at private investors which were asked to "raise the proportion of non-state output in the national services industry". The broad appeal called for no domain to remain off-limits to private investors unless specific legislation existed forbidding such action

 

The State Council wishes to see foreign trade growth, now dominated by exports low-end manufactured goods, be reconfigured by a larger reliance on the services trade.

 

Some local governments came under attack for favoring heavy industries and disregarding the services sector, despite it being responsible for 40.2 percent of China’s GDP last year. The sector captures around 70 percent of the GDP in more developed economies.

 

The idea behind pushing the service sector is to shift the economy’s style of growth from being industry-driven to relying more on domestic demand, thus alleviating the burden for the environment and exports. The sector’s importance is cast into even sharper relief when looking at China’s attempts to shift its economic growth mechanisms whilst lowering energy and resources consumption and addressing a sluggish job market.

 

Given those benefits, "developing the services sector is imperative for China," Liu Xiahui, an economist with the Chinese Academy of Social Sciences, told China Daily. "But for the moment, it still has to rely on the industrial sector to generate more tax revenues and achieve a high rate of economic growth."

 

Liu said that despite encouraging growth in sectors of the general services industry, such as the catering trade, the variations in China’s economic topography see many regions far from ready to accommodate high-end value-added services, such as finance.

 

"Our economic reality must be contended with. But I do hope the country can make bigger strides in developing the services sector, which is in line with China's future needs," Liu added.

 

One of the steps outlined by the State Council is for livelihood sectors, such as real estate, non-state nursing homes for the aged and culture, to be boosted.

 

To address the gap between rural and urban areas, China’s cabinet is pressing for the development of the services industry in rural areas, such as increasing farmers' incomes and a relaxation of the urban household registration system.

 

(China Daily March 29, 2007)