China's service sector opening to foreign investment

"If China wants to copy its success in manufacturing, it needs to further liberalize the service market," said Yi Xiaozhun, deputy director-general of the World Trade Organization (WTO), at the forum.

In fact, China has made progress in lifting restrictions on services.

In the China (Shanghai) Pilot Free Trade Zone (FTZ), measures being tested include regulating foreign investment based on a negative list. It means that overseas investors can conduct business in any scope that is not prohibited on the list.

A wide range of service sectors covering banking, insurance, construction, logistics, education, health and e-commerce are also granted more autonomy in the FTZ.

"Greater market openness is vital for China to build an efficient and competitive service sector," said Yi.

Service sector matters

Analysts often complain that China's manufacturing sector is big but not strong. In Yi's view, the reason is that the underdeveloped service sector is increasingly becoming a bottleneck in China's efforts to move up the value chain.

He said China has to advance into areas of design, R&D, innovation, patents, branding, marketing, distribution, software, logistics and the like as about 90 percent of the value is generated in these services.

"Without parallel growth in services, manufacturing can only grow in quantity not in quality," according to the WTO official.

Rising manufacturing costs are another pressing problem that can be solved by improving the service sector. It is reported that increases in labor and resource costs in China and other Asian economies have prompted many factories to move back to the United States.

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