Services draw most FDI, boost quality growth
Since the launch of reform and opening-up, China has been emphasizing the importance of utilizing foreign investment, making greater efforts to stabilize the inflow of foreign capital and attracting more foreign capital. This approach has yielded rich dividends, boosting China's economic growth, and improving people's livelihoods and living standards.
In recent years, foreign investment in the service sector has grown rapidly, playing an increasingly pivotal role in the development of service trade.
In the early days of opening-up, most of the foreign investment in China was concentrated in manufacturing, which helped make China the "world's factory". However, in 2011, foreign investment in the service sector surpassed that in manufacturing for the first time. By 2015, the amount of foreign investment in services had increased to twice that in manufacturing. Today, the service sector attracts far more foreign capital than manufacturing.
According to the "Report on Foreign Investment in China 2024", manufacturing accounted for only 27.9 percent of actual foreign capital utilization last year, while the service sector used as much as 68.6 percent. Sectors such as transportation, finance, wholesale and retail, technology, media and telecom, scientific research, and business services have seen a dramatic rise in foreign direct investment.
By last year, the top three industries attracting the most foreign capital were scientific research and technical services, leasing and business services, and information and communications technology — all part of the service sector — accounting for 18 percent, 16.2 percent and 10.1 percent of total foreign investment, respectively.
China's service sector has not only grown faster than other sectors but also proven more resilient. Last year, retail sales of consumer goods grew by 7.2 percent, with service-related retail surging by 20 percent.
Besides, per capita service consumption increased by 14.4 percent, accounting for 45.2 percent of total personal spending, up 2 percentage points year-on-year. The trend continues this year, with retail sales of services growing by 7.2 percent in the first seven months, far outpacing the growth of goods retail.
Globally, service exports have been a standout performer. According to the World Trade Organization, global service exports grew at an average annual rate of 4.9 percent from 2013 to 2023, nearly twice the rate of goods exports. China's service exports, in particular, have outpaced the global average, with service trade growing at an annual average of 6.2 percent between 2012 and 2023.
In the first seven months of this year, China's total service trade increased by 14.7 percent, with exports growing by 12.4 percent and imports by 16.4 percent. The export of personal cultural and entertainment services, as well as intellectual property usage fees, grew by 16.3 percent and 15.7 percent, respectively. In particular, travel services grew by a whopping 48.5 percent, making it the largest segment of China's service trade.
The government remains committed to fostering service consumption. The July 30 meeting of the Political Bureau of the Communist Party of China Central Committee said that boosting consumption, particularly consumption of services, is a key priority. As such, policies have been increasingly geared toward improving people's livelihoods, promoting consumption, and assisting service sectors such as tourism, eldercare, childcare and domestic services.
Accordingly, the State Council, China's Cabinet, recently issued guidelines on promoting high-quality service consumption, which emphasizes the importance of expanding market access and further opening up sectors such as telecommunications, education, eldercare and healthcare. By implementing these policies, China is positioning its service sector for even higher growth.
Since the 18th National Congress of the CPC, the country has accorded priority to the high-level design of service trade, further opening up the sector to attract top global service resources.
As service trade improves in quality, it creates a positive cycle that facilitates further opening-up and attracts more foreign investment. International service companies entering China bring with them high-quality services, invigorating domestic market players and fostering stronger ties between domestic and international resources, ultimately driving China's growth.
For example, the National Development and Reform Commission and the Ministry of Commerce recently released the 2024 version of the negative list for foreign investment access, lifting all restrictions in the manufacturing sector and indicating that the focus of opening-up will shift to services in the future. Also, pilot programs for expanding foreign investment in healthcare were launched, further promoting the high-quality development of the sector.
The 2024 China International Fair for Trade in Services, which opened on Sept 12, and the ongoing 136th China Import and Export Fair, widely known as the Canton Fair, which began on Wednesday, showcased China's commitment to higher-level opening-up and consolidated the foundation for the growth of service trade.
China will continue to roll out more policies to further open up the service sector, attracting high-quality foreign investment and advancing the growth of both the service industry and service trade.
The author is a researcher at the Chinese Academy of International Trade and Economic Cooperation.
The views don't necessarily represent those of China Daily.
If you have a specific expertise, or would like to share your thought about our stories, then send us your writings at opinion@chinadaily.com.cn, and comment@chinadaily.com.cn.
