Trade in services set for sustained boom

With Jan-July data reaching $491b, sector to upgrade consumption and industries

Compared with manufacturing and agriculture, the services sector probably never had it so good: its prominence in GDP is growing, the number of services of various kinds is ever expanding, and trade in services is ballooning, as has been highlighted by the six-day 2022 China International Fair for Trade in Services－CIFTIS－that opened in Beijing on Aug 31.

More evidence of the growing significance and vibrancy of trade in services can be found in an office building in West Coast New Area of Qingdao, eastern China's Shandong province. Here, a group of Chinese and Romanians from the translation center of MCC Beris Engineering and Research Corp, a subsidiary of State-owned China Metallurgical Group Corp, create the Romanian version of a popular Chinese TV series. Their creation will be broadcast on a channel owned by TVR, the Eastern European country's public television service, in the fourth quarter of this year.

"We also provide Chinese films, TV series and variety shows in more than a dozen languages, including English, Vietnamese, Indonesian and Malay, to TV stations and new media platforms in more than 195 countries and regions," said Zhao Zhonghui, director of the translation center in Qingdao.

With China emerging as a driver of the global trading system, the market for language services has grown rapidly. MCC Beris has witnessed significant growth in the exports of Chinese content production firms and TV programs in different languages, as well as translation projects of professional content in recent years, Zhao said.

With the added value of the services sector growing fast and accounting for 53 percent of China's GDP in 2021, the government's efforts to bolster new formats of foreign trade, conduct policy trials at its pilot free trade zones and attract foreign businesses have all helped the growth rate of trade in services to exceed that of trade in goods in the first half of this year, said Zhang Jianping, deputy director of the academic committee of the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

In contrast to merchandise trade, trade in services refers to purchase and sale of services. According to the World Trade Organization's definition, trade in services covers 12 major sectors. These include commerce, communication, construction and related engineering, finance, entertainment, culture, sports, tourism, education and environment.

As China's manufacturing industry embraces high technology, the export capacity of many manufacturers and their fees charged for intellectual property and other services are also soaring. These factors have effectively driven the growth of trade in services, he said.

Powered by continuous opening-up, the stable recovery of the services sector, and digitalization of trade in services, the value of China's trade in services surged 20.7 percent year-on-year to 3.39 trillion yuan ($491.37 billion) in the first seven months, data from the Ministry of Commerce showed.

The nation's trade of knowledge-intensive services maintained steady growth, rising 10.2 percent year-on-year to about 1.42 trillion yuan.

Chen Bin, executive vice-president of the Beijing-based China Machinery Industry Federation, said that many developed economies, encouraged by their growth pace, were willing to invest more in trade in services, after securing some market share in global goods trade.

In the manufacturing process of many multinational corporations such as the US-based Apple Inc, the added value accounts for less than 40 percent of the selling price, indicating more than 60 percent of the added value is generated from services, Chen said.

For example, driven by growing exports of telecommunications equipment, trains, electric vehicles and smartphones, many Chinese companies such as China Railway Rolling Stock Corp, Xiaomi Corp and Xuzhou Construction Machinery Group have already built service and marketing networks in overseas markets that provide warehouse, maintenance and after-sales services, he said.

Zhang Hui, vice-president of the Europe subsidiary of Nio, China's smart electric vehicle manufacturer, said the company already exports EVs to Norway. In addition, Nio is building its first overseas plant in Hungary to support its expansion in Germany, the Netherlands, Sweden and Denmark later this year. This will help in the construction of battery swap stations in these countries, creating a solid foundation for local battery swapping and charging services.

The company's Hungary factory is expected to be operational later this month and serve as a production, service and R&D center for the company's power products, including battery-swapping stations in Europe.

More opportunities in services will spring from the Regional Comprehensive Economic Partnership agreement, which took effect on Jan 1, said Sheng Qiuping, China's vice-minister of commerce.

In addition to speeding up the digital transformation of traditional trade in services, and underpinning the growth of smart logistics, online exhibitions and telemedicine, the government will make services more tradable and advance emerging trade in services such as bonded area-based research and development businesses, product testing, and art exhibitions and trade, he said.

Prompted by the rapid growth of both trade in goods and services in China, Best Inc, a Hangzhou, Zhejiang province-based integrated supply chain and logistics solutions provider, also began deliveries of bulkier and heavier items between China and Malaysia, to further expand its service offerings in Southeast Asia in mid-August.

The new service is designed to meet the needs of cross-border e-commerce businesses that sell products made in China to the Malaysian market, satisfying their surging demand for stocking up local warehouses.

The move allows Malaysian consumers to purchase bulky or heavy products like furniture, kitchen appliances or motorcycles from China's e-commerce websites.

"Our freight network across China enables domestic companies to ship products from anywhere in the country, without size or weight restrictions," said Johnny Chou, chairman and CEO of Best Inc, adding its end-to-end services will also benefit small and medium-sized enterprises in Malaysia, as they will have enhanced access to firms in China.

Best's express courier services in Thailand, Vietnam, Malaysia, Singapore and Cambodia delivered around 150 million parcels in Southeast Asia in 2021. It also introduced the heavy parcel delivery service in Thailand in late August.

Companies such as Best made the most of this year's CIFTIS, which focused on opening-up and cooperation in trade in services, green development and digitalization. The fair attracted 71 countries and international organizations, as well as more than 1,400 enterprises, including over 400 Fortune Global 500 companies and industry-leading entities.

In addition to creating a huge platform for MNCs and improving services for foreign trade, CIFTIS has facilitated an upgrade of the nation's consumption and industries, said Wang Dongtang, director-general of the department of trade in services and commercial services at the Ministry of Commerce.

Such efforts appeared to have paid off as Mohammed bin Abdulaziz Alajlan, deputy chairman of Ajlan &Bros Holding Group, or ABHG, a Saudi Arabia-based conglomerate, said the group has always been confident about prospects in the Chinese market and is now optimistic about the country's future economic development, especially in the area of trade in services.

"Given the increasingly close economic and trade exchanges between Saudi Arabia and China, we are looking forward to conducting in-depth exchanges with more Chinese companies, as well as strengthening cooperation in the fields of 5G, artificial intelligence, big data, biotechnology, financial technology and automation," he said.

By partnering with SF Express, a Chinese courier and logistics service provider, the company set up a joint venture in Saudi Arabia in the first quarter. The JV will introduce the latest technological solutions in the country's logistics sector.

Empowered by digital and telecommunication technologies, China's trade in services is expected to maintain robust growth in the second half as business activity continues to expand, said Zhang Wei, chief researcher of the Beijing-based China Association of Trade in Services.

China will accelerate the design of a construction plan for national demonstration zones for innovative development of trade in services, the Ministry of Commerce announced in late August.

The country started a three-year pilot program to promote innovative development of trade in services in 28 pilot areas, including Beijing, Tianjin, Shanghai, Hainan province, Dalian in Liaoning province and Qingdao in Shandong province.

Five adjustments to regulations in the pilot areas have been approved by the State Council, China's Cabinet. They involve expansion of market access in the sectors of tourism, commercial franchises, patent agency services, trade in technology and exhibitions.