China’s trade in services a new vista to watch
As China’s foreign trade in goods has notched a historic high in 2020 despite COVID-19 strains, the services trade sector is also expected to embrace more vitality amid the country’s efforts to open its market wider to the rest of the world.
While data on services trade for the whole year has not yet been released, its performance in the first 11 months has demonstrated prospects of growing business opportunities for both domestic and global players.
Resilience & vitality
According to the World Trade Organization (WTO), in contrast to merchandise trade, trade in services refers to the sale and delivery of intangible products such as transportation, tourism, telecommunications, advertising, computing and accounting, among others.
Excluding tourism services, which suffered a heavy blow due to the pandemic, China’s services trade rose 2.2 percent year-on-year in the January-November period, data by the Ministry of Commerce (MOC) showed.
During the period, services trade reached 4.08 trillion yuan ($631 billion), with 44.2 percent being generated by trade in knowledge-intensive services, which was up 8 percent year-on-year.
Exports and imports of knowledge-intensive services climbed 7.6 percent and 8.4 percent, respectively, injecting much-needed impetus into the global trade market which is still in a recession.
Against the backdrop of a slump in traditional services trade like tourism, the faster expansion of trade in knowledge-intensive services took place thanks to various measures China has adopted to boost the opening-up of the sector, said Li Jun, a researcher with the MOC-affiliated Chinese Academy of International Trade and Economic Cooperation.
Moreover, with a shrinking deficit, the structure of services trade was also further optimized. In the reporting period, China’s deficit in services trade decreased 51.3 percent from a year ago, the MOC data showed.
Although restrictions were in place due to virus containment measures, the China International Fair for Trade in Services was held in Beijing in September. As the first major international economic and trade event since the COVID-19 outbreak, it attracted about 22,000 firms and institutions from 148 countries and regions, including 199 Fortune 500 companies.
During the fair, authorities announced that the country will develop open platforms for the pilot program of innovative development of the services sector, further ease market access for the sector, and take greater initiative to increase imports of quality services, among others.
The measures came as China has consistently pushed forward the opening-up of more service fields and improved the business environment.
The foreign investment law took effect on the first day of 2020, a landmark move that ensures foreign investors get equal access to opportunities in China by regulations including a system of pre-establishment national treatment plus a negative list.
In June, China yet again shortened the negative list for foreign investment, slashing the number of sectors that are off-limits to foreign investors to 33, down from 40 in the 2019 version.
For the opening-up of the financial sector, for instance, foreign ownership caps on securities firms were scrapped and the business scope of foreign-funded banks was further widened. In the telecommunications sector, more value-added businesses will be open for foreign investors.
“Committed to opening up, China has been the largest contributor to global growth of services imports,” said an MOC report issued on the sidelines of the fair, noting that its services imports amounted to $3.4 trillion since November 2012.
The figure represents an average growth rate of 9.2 percent per year, which translates into more than 18 million jobs for global trading partners, according to Chen Chunjiang, an MOC official.
So far, China has been the largest trading partner of more than 120 countries and regions. As it seeks to forge stronger connectivity between internal and external markets under “dual circulation”, the new pattern will enable the country to better share its market potential, experts said.
The MOC report expects China’s services imports to reach $2.5 trillion in the next five years. “This will account for more than 10 percent of the global total,” it said.
It will be a general trend for China to promote the opening-up of the services sector in the 14th Five-Year Plan period (2021-2025), said Zhao Ping, a researcher with the Academy of the China Council for the Promotion of International Trade, citing a WTO report forecasting services trade to account for more than half of the total global trade by 2040.