China to promote faster development of the service sector

China on Wednesday announced the creation of a “leading group” of top officials charged with reducing the country’s reliance on industry by promoting faster development of the service sector. Read original article

In a policy “opinion” made public on Wednesday, the State Council, China’s cabinet, said the group at the powerful National Development and Reform Commission should be matched by similar groups “in all provincial governments”.

The move is a signal of Beijing’s increasing determination to expand the role in the economy played by the service sector in order to create non-agricultural jobs, cap sensitive export growth and ease strains on resources and the environment.

“Giving the service sector the leading role in the national economy as soon as possible...is an effective way to achieve a rapid increase in comprehensive national strength,” the State Council document says. “Accelerating development of the service industry is an important, pressing, arduous and long-term task.”

The cabinet policy restates Beijing’s target of raising the proportion of gross dom-estic product accounted for by services by 3 percentage points between 2005 and 2010.

Services accounted for about 39.9 per cent of GDP in 2005, but the proportion fell to around 39.3 per cent last year, say state media.

In the new document, the State Council outlines areas where officials should promote tertiary industry. Businesses in favoured areas such as software development and outsourced ser-vices should be given preferential access to energy and water while localities should be banned from excluding service companies from elsewhere in China from entering their markets.

The document says the “amount and quality” of foreign investment in the ser-vice sector should be in-creased, as agreed under the terms of China’s accession to the World Trade Organisation, but does not suggest any more rapid opening to international investment.

While the US and other countries have long pushed for greater access to service industries, Beijing remains concerned about the ability of domestic service companies to compete.

The document also stops short of changes to pricing resources and energy, which are in effect subsidised.

The importance of non-industrial activity in China was highlighted in late 2005, when Beijing made a 17 per cent upward revision to official GDP based on a nationwide census that recorded previously ignored service sector activity.