China to develop lagging service sector

March 27th, 2008 - 6:15 pm ICT by admin  

Beijing, March 27 (Xinhua) China will act to accelerate development of its service sector by providing policy and investment support and improving managerial aspect, a top planning official said Thursday. “The main problems of the service industry include its small scale, low quality, inefficient structure, slow reforms and weak innovation,” said Xia Nong, deputy director-general of the National Development and Reform Commission’s (NDRC) department of industrial policies.

China’s service industry’s output was 9.6 trillion yuan ($1.37 trillion) in 2007, up 11.4 percent year-on-year. But the sector’s contribution to gross domestic product (GDP) last year slid 0.3 percent from 2006.

He said that the State Council had proposed in March 2007 to increase the contribution of the service sector to GDP by 3 percent by 2010. This sector should become the dominant activity in some larger cities and out-perform the national GDP growth rate, he added.

Experts, however, warned that this would be a difficult task.

GDP grew 11.4 percent last year, partly driven by secondary industry, whose output rose 13.4 percent. Fixed asset investment of the secondary sector grew 24.8 percent.

The State Council publicized a notice in mid-March to promote the usage of foreign capital in the tertiary sector on the basis of optimizing the sector’s structure and improving its service quality.

In a similar development, China encouraged banks to further support the service industry, according to a document jointly released by the People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission earlier this week.

The banks were urged to support middle and small-scale service enterprises, particularly those relying on intensive labour force, and the development of the logistic industry and electronic commerce.

Ni Yueju, a senior economic expert from the Chinese Academy of Social Sciences, told Xinhua Thursday this move was to help these domestic service enterprises to solve the long-existing financing difficulties.

She added that although the government had taken various measures to boost the service sector, it was still weak compared with developed countries, where the contribution of the service sector to GDP normally is more than 70 percent.

In China the figure is currently below 40 percent.

Ni said in China traditional service activities like tourism were maintaining a strong momentum, adding that “in those newly-emerging service activities like computer technologies, finance, insurance and accounting, Chinese domestic companies’ competitiveness still has a huge gap compared with those global industry leaders.”

Experts held that after China opened up more of its service sector to foreign companies, the country’s service companies were facing great challenges.

Ni added that it needed a long period of time for China to foster a strong service sector and one bottleneck facing domestic service companies is the brain drain and small talent pool.

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