By Lan Xinzhen

FOR BETTER SERVICES: University graduates learn cooking at a household management service base in Chongqing. With economic development and the improvement of living standards,the market needs for household management services keep growing, and high-end housemaids with university degrees become increasingly popular

The Chinese Government encourages foreign investors to increase investment in the service sector. The State Council issued on December 12 the 12th Five-Year Plan(2011-15) on the Development of the Service Sector, requiring government officials to emancipate their minds in order to further expand the scope of opening up. The plan also proposes to deepen reform of monopolistic service industries, open the service sector wider to the outside world and improve the mechanism to diversify investors.

This is China’s first five-year plan on the development of the service sector. The Chinese Government says that in the next few years the average annual growth rates of the sector’s added value and fixed assets investment will surpass those of the GDP and the country’s total fixed assets investment.

In China, state capital is far less enthusiastic than private and foreign capital about involvement in the service sector. Therefore the plan brings huge opportunities for the development of private and foreign capital.

In the past five years, foreign capital has been actively investing in financial institutions,capital markets and the health care sector, and the proportion of foreign investment in the service sector among total foreign investment has kept going up. A research report by Shenyin and Wanguo Securities Co. Ltd. estimates that in the next few years foreign investment in the service sector will further grow and investment procedures will be more convenient.

promoting domestic demand

“The plan will accelerate the development of the service sector,” said Zhao Ping, Deputy Director of the Department of Consumption Economy Studies at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

Among total domestic consumption, commodities still account for a large proportion while service consumption takes up a small proportion, with a lower growth rate than that of commodities. In the past three decades,commodity consumption has kept a doubledigit annual growth, while the growth of service consumption has stood below 10 percent.

Zhao thinks the development of the service sector faces two bottlenecks—monopoly in some service industries, such as telecom and the sale of re fined oil, and some consumer service industries, such as culture, entertainment,sports and leisure, that are less developed to meet people’s demands.

Zhao says the plan proposes to deepen reform of the telecom, railway and other industries, further relax market access and diversify the types of investors. The plan also proposes to encourage and guide private capital to enter industries like finance, transportation, telecom,health care, education and urban construction,along with creating a sound environment for private investment. All these measures will help increase development of the aforementioned industries and stimulate consumption growth.

According to the Shenyin and Wanguo report, the 12th Five-Year Plan on the Development of the Service Sector will offer important employment guarantees for the Chinese economy as plans to intensify urbanization continue.

SERVICES FOR THE ELDERLY: A visitor inquires about an electric nursing bed at the First China International Senior Services Expo held in Shanghai in May 2012

The report says a major obstacle to China’s plans to expand urbanization has to do with its focus on heavy and chemical industries, which contribute little to boosting employment, unlike the service sector. The plan proposes to improve the capacity of the service sector to offer jobs. By 2015 the proportion of workers in service sectors will be 4 percentage points higher than in 2010.Higher employment increases the potential for further consumption.

A boon to the service market

The secondary industry grabs the highest proportion of the country’s GDP compared to the service sector, which ranks second and agriculture, which ranks third.

Figures from the National Bureau of Statistics (NBS) showed that in 2010 China’s service sector accounted for 43.2 percent of the country’s GDP, which means that in 2015 the proportion will surpass 47 percent. In 2010 the proportion of industry was 46.8 percent, and it is estimated that this proportion will not change remarkably in the next five years.

During the 12th Five-Year Plan period(2011-15), the country will accelerate the development of 12 industries, including financial services, transportation and modern logistics.The country will also vigorously develop consumer services, including trading services,culture, tourism, health care and senior services.

The foundation for growth in producer services remains weak. According to NBS figures,the proportion of producer services in the entire service industry in 2010 was only 46 percent,accounting for less than 20 percent of the total GDP. In developed countries, however, the proportion of producer services is normally 60-70 percent, and the proportion in the total GDP is roughly 43 percent.

In comparison, China’s proportion of producer services in terms of GDP is less than half of those in developed countries. Producer services are needed to support China’s industrial upgrading. Particularly, to integrate itself in global value chains, China must vigorously develop producer services.

Zhao says accelerating the development of the service industry is important as the country pushes forward economic restructuring. In the future, two trends will emerge in the development of China’s service sector. First,the service departments of industrial enterprises will be separated and become independent service providers; and second, the present unreasonable and low-level service industries will be continuously improved to meet the demands of economic and social development.

China’s service sector will face rare development opportunities. According to the plan, economic globalization will deepen over the next five years, new patterns will emerge in world economic growth and market demand,and scientific and technological innovation and industrial upgrading will achieve new breakthroughs. China and the reset of the world are increasingly interconnected economically, and the service sector is facing more opportunities in international development.

Meanwhile, China has favorable conditions for rapid development of its service sector.China’s per-capita GDP surpassed $4,000 in 2010 and will be higher during the 12th Five-Year Plan period. This will inevitably facilitate the upgrading of its industrial and consumption structures, bringing a boon to the service market. As industrialization, urbanization and internationalization are deepened, the foundation for the development of the service industry will be further improved.

“During the 12th Five-Year Plan period,China will accelerate reform and opening up and improve the market economic system,which will create a better environment and further stimulate vigorous development of the service sector,” Zhao said. ■