Trade in services empowers high-level opening up

By LIU XIAONING / 12-24-2021 / (Chinese Social Sciences Today)

China International Sports Service and Equipment Fair 2021 (Chengdu) held from Oct. 28-30 Photo:CFP


Trade in services, an important component of international trade and a key area of international cooperation, will inevitably become a strong driving force to promote the construction of a new development paradigm, as it is both the “lubricant” for the stable operation of industrial chains and the “adhesive” for the international division of labor and cooperation.

 
New trends
First, trade in services has become increasingly prominent in the global trading system. With the in-depth development of economic globalization, trade in services shows a higher growth rate than trade in goods, which allows its proportion in global trade to increase continuously.
 
Second, trade in services has become the link that connects global industrial chains and value chains. According to a McKinsey Global Institute report, about one third of the value of global trade in goods is attributed to the service industry. At present, productive services such as R&D and design have fully penetrated the production and manufacturing links. Brand assets, distribution services and after-sales services have become important means by which to enhance the added value of products.
 
Third, digital technology has become a strong engine driving the development of service trade. The deep integration of digital technology and traditional service trade has greatly expanded the boundary of service trade and spawned a series of new service trade models.  
 
Great potential
In 2020, the import and export volume of China’s service trade reached $655.6 billion, ranking second in the world for seven consecutive years. From 2011 to 2019, the average annual growth rate of China’s import and export of service trade reached 7.18%, much higher than the world average and the overall growth rate of China’s foreign trade. However, the proportion of service trade within China’s foreign trade is far lower than the world average, and still has huge room for growth. In terms of the import and export structure of service trade, China’s service trade export volume in 2020 was $278.1 billion, ranking fourth globally. The import volume of service trade was $377.5 billion, ranking second globally. The deficit in trade in services was $99.4 billion. At present, China is still the world’s largest service trade deficit country, and the impact of service trade on the change of current account balance has increased significantly.
 
From the perspective of the service trade’s industrial structure, the trade of traditional service industries, such as transportation, tourism, and construction, still accounts for about half of China’s total service trade. The share of trade in emerging services such as informational, financial, and cultural services, increases steadily. Among them, the increase of net imports in tourism, transportation, and intellectual property royalties is the primary reason for service trade deficit expansion. Reducing the deficit by further expanding the export of service trade is one of the key points for the development of China’s service trade in the next stage.
 
Sustainable driving force
China’s trade in services should speed up the shaping of new development advantages, continuously improve international competitiveness, and provide sustainable incentive for the construction of a new development paradigm.
 
First, through the development of service trade, “blocking points” in the domestic circulation can be addressed effectively. Service trade development can effectively alleviate the problem of insufficient supply of domestic high-end service products, optimize China’s domestic demand market structure, and promote the overall development of China’s domestic service demand market. Meanwhile, a series of institutional reforms, and innovation pilot projects for the development of service trade will promote the free flow of core factors, and lay the foundation for the formation of a unified national market. 
 
Therefore, China should actively take advantage of the digitalization, networking, and intellectualization brought about by the sci-tech revolution, coordinate and integrate digital technology along industrial chains and value chains, promote the digital transformation of service-oriented manufacturing and industry, and accelerate the formation of development models and paths conducive to the innovation of service trade formats.  
 
Next, we must raise China’s position in the international economic and trade cycle through the development of service trade. In this context, China should further improve the service market’s internationalization level, moderately relax the market access of knowledge intensive service industries, implement the negative list of cross-border service trade throughout the country, and promote upgrading of the value chain in key service industries. The development of new formats of digital trade should be accelerated. The export scale of digital information technology services should be gradually expanded. Export capacities of digital content services should be enhanced. It is also advisable to strengthen service trade’s brand building, to actively build a national brand of “Chinese services,” innovate the mode of foreign investment in the service industry, and effectively promote the “going out” of Chinese technology, Chinese standards, and Chinese services.
 
Third, we must ensure the smooth flow and mutual promotion of dual circulations through the development of service trade. Relying on pilot areas for innovative development of service trade, we will  promote the construction of pilot free trade zones, free trade ports, and comprehensive demonstration areas for the expansion and opening up of the national service industry.
 
Liu Xiaoning is from the Institute of International Economics and Politics at the Shandong Academy of Social Sciences.
 
 
Edited by ZHAO YUAN