China's services trade hits record high, bringing three major benefits

The latest services trade data released by China's Ministry of Commerce shows import and export volumes through the first seven months of this year has come in at 2.9754 trillion yuan, a year-on-year increase of 9.9 percent, with the scale reaching a record high, accounting for more than 15 percent of the total foreign trade in goods and services. The same analysis shows exports have increased by 14.6 percent, while imports increased by 7.7 percent. The overall trade deficit has narrowed by approximately 37.1 billion yuan compared with the same period last year.

Billboards of foreign banks are showed in Beijing, August 26, 2017. [File Photo: VCG]

At a time when global trade is facing protectionism, China's trade in services has achieved a growth rate of nearly 10 percent. This shows good momentum based on stability. More importantly, the services trade structure continues to be optimized, with outstanding performance in the import and export of newly developed services.

In the first seven months of this year, the import and export of emerging services totals 988.84 billion yuan, an increase of 20.3 percent, higher than the overall growth rate by 10.4 percent.  Stats show the export of telecommunications computers and information services, insurance services, personal culture and entertainment services has increased at a faster rate; imports covering intellectual property fees, financial services, telecommunications computers and information services have grown faster. China's services trade is shifting from making full use of abundant labor and natural resources through tourism, project contracting and labor more than ten years ago to capital and technology-intensive fields such as consulting, finance, culture, and digital trade. This results in continuous improvement in quality and competitiveness.

In terms of growth points, China's services trade innovation pilot areas have become an important engine for growth. The services trade in 17 pilot areas accounts for 76.4 percent of the national total. The services export and import growth has come in at 24.3 percent and 13.5 percent respectively, higher than the national average. In addition, the growth rate of services trade in the eastern and western regions is higher than in the central and northeastern regions, reaching 12.9 percent and 11.6 percent respectively. This data shows that dividends from the policy of expanding the opening-up of China's services industry are beginning to appear. The services trade's overall structure is improving.

Under the current situation, which shows global trade in goods undergoing a deep global correction, the rapid development of services trade as China's new driving force for foreign trade is significant for China and the world.

Firstly, in terms of the services industry and services trade itself, China has long been lagging behind. The services sector has insufficient export capacity. At the same time, the consumption of Chinese residents is expanding, with the demand for high-quality service products increasing. In addition, the trade deficit has continued to increase through the years. While this long-term unbalanced development is an inevitable result of industrial transformation and upgrading, it also brings greater risks to the next step in the opening up of the service sector.

In the first half of this year, China's services trade achieved its first half-year narrowing of deficit since 2010. This trend then continued in July. This indicates that the momentum of long-term, unbalanced development in China's services import and export sector is expected to improve, which will help China improve its ability to resist risks and continue to improve the international level of its service industry.

Secondly, China is working to expand its experience in promoting the outbound services sector.   

In early 2016, the State Council, China's cabinet, issued a pilot program for innovation in services trade development, and approved pilot projects for the development of services trade innovation in 15 regions including Tianjin and Shanghai. After more than two years, the development of China's services trade can now be quantified in 29 different areas such as management systems, regulatory models and new modes of business, among others. 

In June, the State Council approved a plan for deepening innovation in services trade. As per the plans laid out by the Ministry of Commerce, the number of pilot areas has increased to 17, focusing on fields such as telecommunications, tourism, engineering consulting and finance. There are other initiatives being worked on to expand the services sector to open up China even more to the outside world.

Thirdly, Chinese services trade is seeing an improvement in quality and efficiency. The emerging services trade is being advanced in China through technology, capital and knowledge. Its rapid growth will help drive the development of strategic emerging services industries and technology services such as big data and cloud computing. This is ultimately going to provide China with long-term and strong economic support in an increasingly complicated global economy.

(Author: Dr. Li Fuyi with the Institute for Foreign Economic Studies, Chinese Academy of Macroeconomic Research)