Services Trade: The Key to Becoming powerful

In 2013， Chinas imports and exports totaled$4.16 trillion， with its trade in goods replacing that of the United States as number one in the world. Nonetheless， the country is still far lagging behind in services trade， which represents a stumbling block on Chinas path to becoming a powerful trading nation.

In fact， since its entry to the World Trade Organization （WTO）， China has experienced explosive expansion in its services trade. From 2003 to 2013， total value of its services imports and exports grew from roughly $100 billion to $520 billion. China has also seen its international status in services trade ascend， with its contribution to the world total booming from 0.6 percent in 1982 to 5.6 percent in 2012， ranking third globally.

However， there has also been a severe imbalance in Chinas services trade. The country has witnessed a deficit in services trade for 12 consecutive years， partly because it has opened wider to the outside world after becoming a WTO member， but also， more importantly， China possesses a weakness in the service sector.

Now， the service sector accounts for 70 percent of the worlds economic aggregate， and the figure could be as high as 80 percent in the developed world. Services exports make up 20 percent of the global total， while in China， the proportion is less than 9 percent. According to statistics from the Ministry of Commerce， during the 11th FiveYear Plan （2006-10） period， its services trade deficit advanced from $9.4 billion to $22.1 billion， and its still on the increase.

In recent years， the services trade has become more dependent on the development of knowledge-， technology- and capital-intensive industries， such as telecommunications and finance， computer software and data processing， rather than on traditional labor- or resources-intensive service industries such as tourism and sales services. This represents a structural upgrading.

In China， traditional industries like tourism and transportation still make up the bulk of its services trade， while its knowledge- and capital-intensive sectors are relatively weak compared to developed countries. Despite the fact that high value-added industries like insurance and finance have registered robust growth in the past few years， they are far from being capable of playing a leading role. In 2010， almost half of Chinas services exports came from traditional service industries， and finance， insurance， information technology and telecommunications make up only 7.6 percent of the total， setting off alarm bells that a trade upgrading is extremely urgent.

In the days to come， China will see a decline in its population dividends. Reduced supply and the rising cost of labor will erode the profits of the manufacturing industry. In this way， capital return rates will continue to decline， and exports will contribute less to economic growth. With resource dividends continuously decaying， economic growth will be constrained by resource shortage and deteriorated environment.

While labor and resource costs are on the increase， the upward pressure on the renminbi exchange rate keeps mounting， China will find it difficult to maintain export as its major engine for economic growth.

Hence， the country needs to complete the overall upgrading of its industrial chain through innovations in research and development， brand value and marketing channels， and energetically develop highend services trade.endprint