China eyes more liberalized tertiary industry

China will further open up its services sector to foreign capital this year, while mulling rules and regulations to create a more level playing field, as the value-added industry becomes a powerful engine fueling the world's second-largest economy.

"Gearing up for the development of the services sector is a must for China to be able to ensure a stable economy and an expanding job market amid economic restructuring," said the country's Vice-Premier Wang Yang in a written address to the summit of the Third China (Beijing) International Fair for Trade in Services, or CIFTIS, on Wednesday.

Wang said China will slowly and steadily open up more fields in its services sector - initially in Shanghai's free trade zone, then expanding to the rest of the country - and take the initiative to be further integrate into global value chains.

The government eased restrictions on investment in such industries as shipping, communications, banking, legal and healthcare in the FTZ last September when the pilot zone first opened its office.

The services sector has been on the fast track of development since the beginning of the 12th Five-Year Plan (2011-15). Its share of the country's GDP growth reached 46.1 percent last year, outstripping that of manufacturing to become the largest sector for the first time.

Meanwhile, trade in services was valued at about $540 billion, up 14.7 percent year on year, accounting for 11.5 percent of total foreign trade in 2013. The country's share of global services trade increased to 6 percent during the same period.

"Despite that, the services sector remains a weak link of the economic and social progress in China," Wang said. "We have to step up to transform the sector, raise its share in the national economy and move up the value chain."

"With the opening-up of the services sector, more and more Chinese enterprises will join the global value chain and play a bigger role in the world economy .... and the world cannot afford to neglect that," said Zhang Baowen, vice-chairman of the Standing Committee of the National People's Congress.

He added that the country is set to further boost exports in services in fields such as traditional Chinese medicine, animation, film, publishing and sports, as well as communications, financial and information technology.

"The country's integration into global value and supply chains and its merchandise exports rely to a large extent on its services sector and services trade," said Yi Xiaozhun, deputy director-general of the World Trade Organization.

China has increased its efforts to draw more foreign capital to the services sector, hoping to ride a wave of booming service sectors worldwide. Amendments to laws that target overseas capital investment in China have been on the agenda.

"The current policy vision rightly considers the strengthening of services as essential for moving the manufacturing sector into a higher level on the global value chain, and ensuring the sustainable development of the Chinese economy," Yi said.

The global value chain has in the past few decades become "a dominant feature of world trade, and services have played an increasingly important role in countries at all levels of development," said William Danvers, deputy secretary-general of the Organization for Economic Cooperation and Development.

"Well-functioning transport, logistics, finance, communications, and other businesses and professional services are absolutely critical to ensure a seamless flow of goods and services along value chains. ... And research and development, design and marketing are all critical to competitiveness in high-end manufacturing," he added.

Danvers said that services now represent 80 percent of employment and 75 percent of GDP in developed countries. "In OECD countries, about 50 percent of the value added to the total exports comes from services. In China, the share is about 30 percent," he said.

"Raising this share as envisaged in the 12th Five-Year Plan presents a real opportunity for China to move up the value chain," he said. "Early analysis shows that reducing services trade barriers can increase imports, but they can also increase exports twice as much."

According to Yi: "While securing the reforms on the home front is essential, it's also important for China to engage with other WTO members in negotiating broader liberalization and more predictable multilateral rules so that its services exports can expand under stable and predictable conditions."

Opening-up of services is a two-way street and should be mutually beneficial, Wang noted in his address. "China is willing to be proactively engaged in multilateral negotiations in pushing forward services liberalization and a balanced development in the field worldwide," he said.