China set to bolster service trade

The Chinese central government has vowed to shore up service trade to nurture new growth sources as the traditional goods trade has faltered amid a slowing economy.

China will boost combined service imports and exports to 1 trillion U.S. dollars by 2020 and improve their proportion in total foreign trade, said a guideline released Saturday by the State Council, China's cabinet.

It was the first time for central policy makers to set a specific target for the sector.

The guideline said China's service trade is still less competitive in the global market despite years of rapid improvements, but the sector is important to ensure employment, boost economic quality and nurture new growth sources.

Both quality and quantity should be prioritized to develop service trade, said Bai Ming, researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce (MOC).

"China should grasp the opportunity and nurture a new advantage," he added.

China will encourage high added value and technology services, import more capital and skill-intensive services and promote trade with emerging economies, the guideline said.

Services in transportation, communication, finance, R&D and environmental protection will be prioritized and services featuring Chinese culture such as entertainment and traditional Chinese medicine will be promoted, the guideline said.

In 2014, China's service exports gained 7.6 percent to 222.21 billion U.S. dollars year on year, while imports expanded over 15 percent to 382.13 billion U.S. dollars, MOC data showed. The growth rates were markedly higher than total foreign trade, which only edged up by 3.4 percent.

However, service trade only took a minor share of total trade, accounting for 12.3 percent last year, up from 11.5 percent in 2013 and 10.8 percent in 2012. Experts believe the sector has room for improvement and needs policy support to open up.

The Shanghai Free Trade Zone (FTZ) has piloted the opening of service trade since it was established in 2013, adopting "negative list" management and measures to facilitate investment and trade.

"The Shanghai FTZ has created favorable conditions to develop service trade and its experience should be promoted in other places," Bai said.

In addition, policy makers promised to open up the service sector and loosen access for foreign investment in industries including child care, old-age care, architectural design, accounting, auditing, logistics and e-commerce.

The guideline marked the country's latest efforts in a policy shift to develop the service sector from an old model favoring manufacturing.

Director of the China (Hainan) Institute for Reform and Development, Chi Fulin said China is laying the foundation for a service sector-led economy. J.P. Morgan Chase predicted the service sector will replace manufacturing, the traditional engine of growth, to drive economic growth in 2015.

China has become increasingly reliant on the sector to address downward pressures. The added value from the tertiary sector accounted for 48.2 percent of GDP in 2014.