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Service Industries Expanding in China

The Expo theme, "service Industries: The New Impetus of World Economic Development," recognized that service industries have become a major focus and motive force within the world economy. The value of the service sector is one of the most important indicators of a country's economic development. It accounts for about 70 percent-80 percent of the gross domestic product (GDP) of developed countries and about 50 percent of some developing countries. In China the service sector accounted for a mere 33.1 percent of GDP in 2003, even though that was 9.4 percentage points greater than the corresponding figure for 1978.

Organized by the State Development and Reform Commission, the Ministry of Commerce, the China Banking Supervision Commission and the Beijing municipal government, and managed by the China Council for the Promotion of International Trade Beijing Sub-council, the Expo was designed to help China learn more about how to develop its service industries with a view to worldwide practices. About 750 representatives from China and 20 other countries participated in the opening ceremony of the Expo, including Bill Gates, chairman of Microsoft, Norman Sorensen, president of America Service Industries Federation and Christopher Roberts, chairman of the Policy Committee of the Europe Service Industries Forum.

Beijing, a leader of China's economic development, is now on a fast track in developing its service industries.

At the opening ceremony of the Expo on June 30, Beijing Mayor Wang Qishan said, "In 2005, the output of service industries in Beijing will reach 246 billion yuan (US$28.6 billion), accounting for about 60 percent of Beijing's GDP. People engaged in service industries are 56 percent of the total employed population."

Witnessing the Emergence of China's Service Sector

The improvements already made in Beijing are stark when compared to the past.

Farid Fakhour, owner of the 1,001 Nights Restaurant in Beijing, said, "When I first came to Beijing in 1978 to study medicine, I could find neither restaurants nor taxis. You could not find one empty taxi on the street. There were only two star-class hotels, the Beijing and Minzu. And there was only one foreign restaurant, Maxim's, in Beijing." By 2004 the city had more than 622 hotels, 572 of which were star-rated, with a total of 103,000 rooms. Delicious and exquisite cuisines from around the world could easily be found in Beijing. At the end of 2003, there were 11.09 million mobile phone subscribers, meaning that 76.1 mobile phone sets were in use for every 100 local residents. About 61 of each 100 families in Beijing had personal computers. The most popular departments in universities and colleges were those focused on professional service industries such as information technologies and telecommunications, logistics, law, auditing, human resources management and advertising.

China now has 61 insurance companies, 55 more than in the early 1990s. Of these, 37 are foreign-funded companies, with total assets of 19.8 billion yuan (US$2.3 billion). The emergence of foreign insurance companies prompted the modernization of the Chinese insurance industry. The insurance industry accounts for 15.5 percent of Beijing's GDP and is now one of the city's major industries.

A series of new regulations has improved the quality of China's service industries. Beginning July 1, air passengers can get compensation, in the form of cash or discounts for buying tickets, if commercial airlines delay flights for more than four hours because of problems attributed to the airline companies.

Big events in China's service industries create brand effects in China. During the recently concluded Seventh China (Beijing) International High-tech Expo, agreements were achieved concerning 252 projects worth US$43.96 billion. High-tech deals clinched at the Expo mainly involved electronics, information, pharmaceuticals, environmental protection and new materials technologies, with high-tech proportional trade values increasing to 58.4 percent from the 2003 Expo's 36 percent.

The exhibition industry is now emerging in China. From June 9-16, admissions to the Eighth Beijing International Automobile Industry Exhibition (Auto China 2004) totalled a record-breaking 460,000.

Government's Role in Service Industries Scrutinized

During the "Customer-Oriented Operation System of Commercial Banks" symposium, held on July 1, Wei Jie, a professor from the Finance Department at Tsinghua University, said, "Thirty percent of China's bad loans can be attributed to the government's intervention in the economy.

"Complex approval procedures and inefficient workflows, to some extent, block China's finance industry. China is in urgent need of simplifying approval procedures and strengthening administrative management and supervision." Wei said that since the founding of the People's Republic of China in 1949, the government has been focusing on developing agriculture and manufacturing industries. As a result, service industries in China lag behind the first and second industries. Monopolies, excessive government intervention, disordered markets, immature legal systems, lack of capital and a weak sense of the importance of service industries lead to a great gap between China's service industries and those of developed countries.

Leaders make Serious Promises to the World

By 2020, service industries are expected to account for 50 percent-60 percent of China's GDP, and 40 percent of the workforce is expected to be engaged in service industries.

Hu Jintao, president of the People's Republic of China, has said, "China's service industries will be the nation's most significant force for promoting economic development and the main channel for solving China's employment problems.?

Long Yongtu, the chief negotiator of China's accession to the WTO, also once said, "China will gradually further open up its banking, insurance, telecommunications, foreign trade and travel industries to meet its WTO commitments."