Policies

China’s Symphony of Upgrading the Trade in Services and Improving Its Performance

2015-7-20 9:14:03

As Chinese economy has entered into a “new normal”, we have to simultaneously deal with the slowdown in economic growth, make difficult structural adjustments, and absorb the effects of the previous economic stimulus policies. It is, hence, particularly important to promote service-oriented economic reform and transformation. In such a context, the “training on policies and practices of promoting trade in services in Beijing”, co-sponsored by China Council for the Promotion of International Trade Beijing Sub-council and Beijing Chamber of International Commerce, was held in the capital city. During the training, experts and professionals systematically analyzed the support policies of national and municipal governments, and offered suggestions on accelerated development of local enterprises engaged in trade in services.

China’s trade in services as a percentage of external trade continues in the uptrend, registering 10.3%, 10.8%, 11.5% and 12.3% respectively from 2011 to 2014. As a new highlight and growth engine of external trade, trade in services has entered into the phase of rapid development.

Meanwhile, China’s trade in services figures increasingly prominent in international trade. China started quantifying trade in services in 1982, a year when its total service import and export added up to USD 4.4 billion, accounting for only 0.6% of the world’s total. In 2014, the figure climbed to USD 604.34 billion, topping USD 600 billion for the first time and taking up over 6% of the global sum. With the growing scale comes an improved structure. In the previous year, China’s import and export of high value-added services maintained its dizzy onward march; that of financial services, communication services, and computer and information services recorded a growth of 59.5%, 24.6% and 25.4% respectively.

However, there is still a considerable gap between China and developed countries. Angel Gurría, Secretary General of OECD, has recently claimed that China’s services contribute to 30% of the country’s total export, which proportion of European members is up to 50%. On the plus side, gap is the synonym of potential. Today, as Chinese economy plumps for quality over quantity, attention and support is being drummed up for the service industry.

Prior to the end of 1Q15, the central government had issued guidance twice on trade in services. On Jan. 14^th, the State Council executive meeting chaired by Premier Li Keqiang sounded a call for revving up development of trade in services and expanding markets through restructuring. It was the second time in eight months that the sector had been the topic of the executive meeting. If anything, this time the focus of attention expanded from producer services to communication, culture, education, finance, transport, energy conservation and environmental protection, coupled with practical measures for guiding and supporting the trading parties and flexibly utilizing the financial instruments.

On Jan. 28^th, the Opinions on Accelerating the Development of Trade in Services were published by the State Council. This is the first time the State Council has systematically put forward the strategic objectives and principal tasks for trade in services and made comprehensive deployment for accelerating the development of this trade. The Opinions pointed out that by 2020, China’s total service import and export would have hit USD 1 trillion; its share of external trade would climb further up, and its proportion of the world’s total grow by the year.

Ministries and commissions are in action. At the regular press conference of the Ministry of Commerce (MOFCOM) in February, spokesman Shen Danyang mentioned that MOFCOM, together with departments concerned, had embarked on a project to invigorate trade in services from five perspectives: First, to enhance planning and guidance. Preliminary studies on the 13^th Five-Year Plan for Trade in Services would be initiated in 2015, the results expected to be published in 1H16. Besides, a guiding catalogue for key service export would be drafted and released this year. Second, to optimize fiscal policies. MOFCOM would leverage the special funds for external trade and economic development, and ramp up support for trade in services. It would further connect the sector to social capital, and team up with the Ministry of Finance and the State Administration of Taxation to set out zero tax or tax exemption policy concerning service export. Third, to develop new financial services. MOFCOM would facilitate key projects regarding trade in services, encourage financial institutions to present original offerings on condition of risk control, and, in particular, call on policy-based ones to lend their business reach to international M&A and market expansion by enterprises with interests in the sector. Fourth, to plan and build functional zones for trade in services. From this year onwards, specific cities and regions would be hand-picked to pilot innovative trade in services and featured service export bases. Fifth, to build promotional platforms. MOFCOM would assist relevant chambers of commerce, associations and agencies in carrying out different types of promotions, call on enterprises to participate in major fairs overseas for trade in services, and ink deals with main partners and nations along the Belt and the Road for pragmatic cooperation on trade in services under bilateral frameworks.