Factors such as gloomy global economic growth and China-US trade friction are bringing uncertainty to China’s economy. In order to neutralize the influence of trade friction on China and promote sustainable, healthy and stable economic development, China should deepen its reform and opening up, strengthen independent innovation and establish a solid foundation for various industries.

China’s service industry is an important power supporting the nation’s sustainable economic growth. The service industry is an important part of a modern industrial system, and it plays an increasingly important role in national economic and social development. The increasing proportion of the service industry in the national economy is a natural result of economic structural adjustment and upgrading. The value-added of the service sector in China has contributed more than half of China’s GDP for consecutive years.

The service sector is a major force for creating jobs and absorbing laborers transferred from the agricultural and industrial sectors. As mobile internet technology spreads and becomes more innovative, the development model of “the internet plus traditional industrial sectors” continues to develop, and new modes of the service sector constantly emerge. The emergence of these new economic modes and services broadens the job market and relieves employment pressure.

The service sector shows distinct technological progress. Technological progress represented by information technology profoundly impacts the service sector. The application of such technologies as the internet and artificial intelligence expands the trade scope and transaction frequency of service industries, which tremendously increases their rate of production.

In addition, the massive domestic market continues to be a factor through the fusion of the service sector and the other sectors of the national economy. The 2018 Central Economic Work Conference, which specified China’s economic goals in 2019, stated at the top of its agenda that efforts should be made “to advance the deep integration of the advanced manufacturing industry with the modern service industry.” Independent innovation and industrial upgrading are essential for the high-quality development of China’s manufacturing industry. However, promoting deep integration and a mutually supportive relationship between the manufacturing industry and the modern service industry, particularly the knowledge-intensive service industry, is also a win-win choice.

The establishment of a service industrial system supporting the development of agriculture is an effective path towards agricultural modernization and green development. A powerful and efficient modern agriculture with high added value cannot be established without the high-quality development of service industries in fields such as rural finance, agricultural technology, logistics and labor training.

Technological development has reduced the obstacles blocking the cross-border transaction of the service sector. China has been the second largest nation in service trade for consecutive years . In 2011, the service industry became the largest receiver of foreign investment in China. Foreign investment plays an important role in the development and structural upgrading of China’s service sector.

In the face of a changing external environment, China has no choice but to establish a powerful domestic market. The general consumption structure change both domestic and abroad suggests that as people’s income and leisure time increase, the ratio of service consumption in the total consumption will continue to rise. Service consumption is becoming the new field and direction for consumption upgrading. It is estimated that service consumption will play a more prominent role in forming a powerful domestic market.
 

The innovation with the service modality and model is a new bright point in the development of China’s service industry. The deep integration of the service sector with technologies such as the internet, big data and artificial intelligence plays a positive role in increasing the resource utilization rate, broadening fields of employment and expanding the market for service consumption. 

China should strive to promote the high-quality development of its service industry in several ways. First of all, China should deepen supply-side structural reform in the service sector. Currently, Chinese people have a strong demand for service products in healthcare, elderly care and cultural products. The reform should address the barriers holding back China’s service supply in these fields.

Second, China should increase its innovation with the service sector’s fusion with other sectors, which is key to solving the problem of industrial upgrading in the service sector. China should carry out its innovation-driven development strategy and encourage the service sector to find innovative ways to integrate itself with other sectors. Industrial integration and innovation-driven development are crucial to the structural upgrading of service industries.

Third, China should innovate with its approaches to administering and governing the service sector. The new guidelines for administration should both uphold the bottom line and show flexibility and timeliness. In the end, China should establish a governance system over the service sector that effectively integrates the efforts of enterprises, the sector organization, the public and the government.

Last of all, China should promote a new pattern of high-level opening up for the service sector. First, China should implement in full scale the negative list for market access in the service sector. Second, China should continue to facilitate overseas investment into the service sector. Third, reforms should be made regulating China’s service trade, and a long-term effective mechanism should be established to safeguard its healthy development.

 

This article was edited and translated from Guangming Daily. Xia Jiechang is deputy director of the National Academy of Economic Strategy at the Chinese Academy of  Social Sciences.

edited by CHEN ALONG