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Vast Potential in the Service Sector

Liu Jie

Development of service trade might offer another arena for China to compete with its robust counterparts in the international market.

"Service trade, ranging from building, finance, tourism, education, transportation to tele-information and beyond, has created many business opportunities for developing countries and has become an new economic growing point for them in recent years," said Dong Fangcheng, a professor at the Capital Economic and Trade University.

According to statistics from the World Trade Organization (WTO), during 1990-1998, the average annual increase rate of service trade for the world's developed countries, including the United States, Germany, Australia and Japan, was 6.8 percent, while developing countries reaching 14.3 percent.

For China in 1998, the total service trade volume hit US$53 billion, accounting for 2.02 percent of the world as a whole, and the average annual growth rate stood at 20 percent from 1990 to 1998.

But, Dong pointed out, to obtain sustainable and healthy development, optimizing service trade structure - traditional service trade adjustment and new emerging ones promotion - should top the agenda.

"We may pay much attention to a group of new service items, for example, information collection, accounting for lawsuits, law analysis and market investigation, which do not have high requirements for professional skills and will create jobs for surplus urban labor resources," Dong suggested.

Meanwhile, he worried that overdevelopment of tourism in China, especially in the remote regions where the environment protection is relatively poor, may bring disaster to the country's environment, projections that have been proven by Dianchi in Yunnan Province and Guilin in the Guangxi Zhuang Autonomous Region.

"Technology tours, education tours and folk-customs tours should be promoted," Dong added.

Since the signing of the General Agreement on Trade in Services (GATS) in 1995, the world's service trade volume has risen 9 percent on a year-to-year basis.

So far, service trade volume occupies 20 percent of the foreign trade sector as a whole, while experts predict that figure is expected to surpass 50 percent by the year 2020.

Wang, an official from the China International Trade Promotion Council, who did not give his full name, told Business Weekly that China's service trade exports have basically focused on primary services, including building, tourism and transportation, accounting for more than half of the country's total trade volume.

"On the one hand, we have not taken full advantage of the service field with high added value, such as various professional services and information technology-related new services.

On the other hand, barriers to market entry for foreign competitors in some sectors still exist, which leaves room for domestic companies to monopolize specific markets" Wang acknowledged.

He cited the finance service as an example and urged Chinese financial institutions carrying out overall innovation to do it not only in accordance with the central government's policies, but also to keep in line with international practices to survive and prevail in the cut-throat competition after China's accession to the WTO.

Wang disclosed that some high-tech related service sectors, involving software, Internet design and management, are expected to obtain support from the government to operate foreign businesses.

"We do not lag behind some developed countries in terms of technology and talent in such sectors. Furthermore, encouraging the development of high-tech related services will prevent draining of domestic talent as well as attract more overseas Chinese to return," Wang stressed.

(China Daily)

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