Executive Briefings

Chinese Economy Relies on Services More and More

Beijing is crawling with motorcycle-mounted deliverymen, one sign of the rapid growth of China's service industries. Services grew 8.3 percent last year and for the first time generated more than half of gross domestic product, or 50.5 percent. Manufacturing rose only 6 percent. "If it hadn't been for the service sector, China's economy would be in a much worse state today," says Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. He notes that all kinds of services have expanded quickly in recent years.

Service businesses are largely clean, unlike the factories China has long relied on. And services generate more jobs per yuan of output, an important benefit as the country shifts to a slower growth rate. The industry expands in tandem with higher household incomes as families spend more on education, insurance, restaurants, travel and the other trappings of middle-class life. President Xi Jinping stressed in a Jan. 18 meeting with ministers and provincial officials the role of services, innovation, and household consumption as the new economic drivers.

China has a long way to go before it resembles the U.S. economy, which derives almost 80 percent of GDP from services.

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Service businesses are largely clean, unlike the factories China has long relied on. And services generate more jobs per yuan of output, an important benefit as the country shifts to a slower growth rate. The industry expands in tandem with higher household incomes as families spend more on education, insurance, restaurants, travel and the other trappings of middle-class life. President Xi Jinping stressed in a Jan. 18 meeting with ministers and provincial officials the role of services, innovation, and household consumption as the new economic drivers.

China has a long way to go before it resembles the U.S. economy, which derives almost 80 percent of GDP from services.

Read Full Article