China's move to further open up the service industry in key regions will prompt foreign companies to provide more quality services in the Chinese market, and push domestic players to promote innovation and advance the country's supply-side structural reform.
This is what experts and foreign business leaders said in response to the State Council, China's Cabinet, approving the launch of three-year pilot programs to further open up the service sector in Tianjin, Shanghai and Chongqing municipalities, as well as Hainan province in late April. Under the new policy, these regions can proceed with 203 comprehensive opening-up trials in the service sector.
In 2015, Beijing became the first region to get the central authorities' approval to develop as China's first pilot zone to further open up the service sector.
The service sector offers intangible products such as information, professional and social assistance, waste management, healthcare, warehousing and transportation services.
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"At this stage, it is not enough to rely on Beijing alone to expand the opening-up of the service sector," said Bai Ming, deputy director of international market research at Beijing-based Chinese Academy of International Trade and Economic Cooperation. There is also a need to explore other regions so that such pilot programs can be popularized.
At this stage, it is not enough to rely on Beijing alone to expand the opening-up of the service sector.
Bai Ming, deputy director of international market research at Beijing-based Chinese Academy of International Trade and Economic Cooperation
Compared with Beijing, Bai said, the other four regions (Tianjin, Shanghai, Chongqing and Hainan) have more room for developing professional, information and intermediary services, and strengthen their resource and industrial advantages in other areas.
The Government Work Report delivered by Premier Li Keqiang at the fourth session of the 13th National People's Congress on March 5 said China aims to open up its service sector in a well-regulated manner, launch more comprehensive trials for further opening up the sector, and devise a negative list for cross-border trade in services.
In this regard, as Zong Changqing, director-general of the Commerce Ministry's department of foreign investment administration, said, local governments will be urged to serve major national strategies and explore opportunities for establishing replicable practices for the development of a modern industrial system and higher-level opening-up.
Talking about the four pilot regions, Zhao Ping, vice-president of the research institute at China Council for the Promotion of International Trade, said that apart from focusing on the higher-level opening up of key sectors, including scientific, business, logistics, financial and education services, they are also supposed to complement each other by specializing in different areas.
With the new policy support, the government plans to build Tianjin into an advanced manufacturing research and development base and an international shipping hub in northern China, and develop Hainan into a global tourism center by deepening economic reform.
And while urging Chongqing to develop low-carbon and green industries and transform itself into a world-class land-based logistics center, especially as a China-Europe freight train hub, the government will enhance Shanghai's position as an international economic, financial, trade, shipping and scientific innovation center.
Under the new policy, local governments in the four trial zones will help foreign entities to establish fully-owned financial firms and invest in travel agencies engaged in the outbound tourism business, and allow foreign banks to provide import-export tax payment services.
In order to promote regional growth, the government has proposed 33 pilot tasks including joint construction of industrial parks, and scientific and technological cooperation in Beijing, Tianjin and Hebei province, permitting cross-border debt issuance, and cross-border merger and acquisition services by Shanghai's Hongqiao district, and exploring the possibility of establishing a pricing negotiation mechanism for China-Europe train services in Chongqing.
The government has selected the municipalities and the Hainan Free Trade Zone as the two rounds of pilot regions, as it expects them to generate more growth points for surrounding areas, said Liu Tao, a researcher at the institute of market economy at the State Council's Development Research Center. As such, cities and provinces that have a dynamic service sector, and are home to a large number of businesses engaged in service trade and institutional innovation, have a greater chance of making it to the third pilot program list.
Corroborating Liu, Zhang Yong, deputy director of Shanghai finance and development laboratory, which is affiliated to the Chinese Academy of Social Sciences, said the trial programs will prompt international companies to provide more high-quality services, which in turn will facilitate the growth of the real economy and encourage more Chinese companies to upgrade their services and learn from their foreign competitors.
This is important, because despite the service industry accounting for about 55 percent of China's GDP, its share of the economy is still about 20 percentage points below that in developed countries. "The sector still faces problems such as inadequate integration with manufacturing and the slow pace of growth of the modern service industry," said Gu Jun, director-general of Shanghai Municipal Commission of Commerce.
While expecting China's high-quality economic development to channel more foreign direct investment into the services sector, Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges, said the service sector will remain attractive to overseas investors as the Chinese economy expands.
Thanks to the country's move to further expand its market and consolidate its position as the biggest trading partner of more than 120 countries and regions, China's service sector attracted 237.79 billion yuan (US$36.62 billion) of foreign investment in the first quarter of this year, up 51.5 percent year-on-year, according to the Ministry of Commerce. "More FDI will flow into industries such as artificial intelligence, information technology, pharmaceuticals and healthcare, high-end manufacturing, and the new economy, such as industrial internet," Zhang Yansheng said.
In fact, Vorwerk Group, a German industrial and technology company, is set to establish a digital solution center in Shanghai in the second half of this year to transform from a manufacturing company to a service-oriented manufacturer, in order to better adapt to China's changing market environment. "We hope to seize the fresh opportunities arising from China's dual circulation development paradigm via introducing more personalized products and services that add value and health relevance to people's lives," said Cha Sheng, general manager of Vorwerk China.
Yet despite the efficiency of China's ports and shipping companies, there remains a gap between the inland areas and major port cities, said Jens Eskelund, managing director of Maersk China Ltd, the shipping and logistics service provider for A.P. Moller-Maersk Group. So instead of investing heavily in shipping operations, the Danish company has been trying to expand its rail freight, land asset and airfreight services across China. It has opened 35 railway terminals in the country over the past two years, and arranged for over 210 freight trains to transport goods from many Chinese cities to European countries including Germany and France.
Green industries that include technologies, equipment and services for reducing carbon footprint are likely to become more popular among multinational companies as China continues to deliver on its commitment to peak carbon emissions before 2030 and achieve carbon neutrality before 2060, said Olivier Blum, chief strategy officer of the French industrial conglomerate Schneider Electric SA.
That China's total service trade volume grew by 0.5 percent year-on-year to 1.16 trillion yuan in the January-March period, and trade in knowledge-intensive services surged by 15.5 percent year-on-year, accounting for 46.6 percent of the country's total trade in services shows the country is on way to reap the dividends of further opening up its service sector.
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Contact the writer at zhongnan@chinadaily.com.cn