Services emerging as key driver

Bolstered by sustained policy support, China's services sector is assuming a greater role in rebalancing the economy and unlocking domestic demand, helping underpin long-term growth amid persistent external uncertainties, officials and experts said.

The sector contributed more than three-fifths of economic growth in the first half, while spending on services grew faster than on goods. Meanwhile, the services trade deficit continued to narrow — gains they said point to further expansion and upgrading in the months ahead.

The strong showing comes as guidelines issued in late April by the State Council — China's Cabinet — called for expanding and upgrading the services sector, with the goal of boosting the sector's value to 100 trillion yuan ($14.83 trillion) by 2030, up from around 80 trillion yuan last year.

"Authorities have followed up with 81 measures over the past six months," said Li Chunfang, deputy director of the department of industry at the National Development and Reform Commission.

Highlighting the sector's growing contribution to the economy, Li said at a news conference in Beijing on Tuesday that services accounted for 66.1 percent of economic growth in the first half, up 5.9 percentage points from a year earlier.

Business confidence also remained firm, with the sector's business expectations index remaining above 55, in expansionary territory, for five consecutive months through August, she added.

With boosting domestic demand high on China's policy agenda, upgrading the services sector can provide lasting support for growth and help build a more balanced, resilient economy, said Zhu Keli, founding director of the China Institute of New Economy.

Producer services, a central focus of China's efforts to upgrade its services sector, are closely tied to manufacturing.

"Deeper integration between advanced manufacturing and modern services can help industries move up the value chain and shift the focus of economic growth from scale to efficiency and innovation," Zhu said.

The country's top economic regulator has launched two rounds of national pilot programs to deepen integration between advanced manufacturing and modern services, involving selected regions and companies, Li said.

Further efforts will focus on industrial design, shared technical services and intellectual property rights commercialization to strengthen services across the industrial chain. The commission will also encourage private investment in producer services platforms linked to advanced manufacturing clusters, she added.

Alongside the drive to upgrade producer services, the April guidelines also seek to unlock consumption potential by making consumer services "more quality-oriented, diversified and convenient".

According to the National Bureau of Statistics, retail sales of services rose 4.9 percent year-on-year in the first eight months, outpacing growth in goods sales by 3.9 percentage points and highlighting services as a bright spot in consumer spending.

Authorities have rolled out a nationwide subsidy program for elderly care services, implemented 18 measures to spur consumption in lower-tier markets and introduced nine measures to boost recreational vehicle consumption, said Li at the NDRC.

Re-lending and fiscal interest subsidies are also helping lower financing costs for services firms, said Che Shiyi, deputy director general of the credit policy department at the People's Bank of China.

The central bank and seven other departments released guidelines on Monday to support the sector's expansion and upgrading, urging lenders to reduce their reliance on collateral and ease financing difficulties for asset-light businesses.

China is also opening its services sector wider to the world. Spending by overseas visitors in the country rose 27.8 percent year-on-year in the first seven months, while services exports grew 17.1 percent, helping narrow the services trade deficit by about 16 percent, Li said.

Continued opening-up allows foreign companies to tap China's vast services market and draw on its well-developed industrial ecosystem, said Wang Peng, a researcher with the Beijing Academy of Social Sciences.

In healthcare, for instance, China's expanding services trade, vast market and improving regulatory environment are creating fresh opportunities for foreign companies, said Edward Zhou, president of Johnson & Johnson MedTech China.

zhangchenxu@chinadaily.com.cn