Service trade is an important part of international trade and an important field of international economic and trade cooperation, and plays an important role in building a new development pattern. In 2021, the 14th Five-Year Plan for the Development of Service Trade issued by 24 departments, including the Ministry of Commerce, proposed to promote the total growth, structural optimization and efficiency improvement of service trade, which played an important role in promoting the construction of a new open economic system and a modern economic system at a higher level. This issue invites several experts to discuss the development of China’s service trade.
Moderator Xu Xiangmei, director and researcher of the theoretical department of this newspaper.
The status of a big country in service trade has been further consolidated.
Moderator: What is the difference between service trade and traditional trade? What is the current development situation of China’s service trade?
Li Jun (Director and Researcher, Institute of International Service Trade, Institute of International Trade and Economic Cooperation, Ministry of Commerce):China International Fair for Trade in Services in 2022 was held at the end of August. This important international economic and trade activity is closely related to our daily life. But what is service trade? Many people don’t necessarily have a deep understanding, and even don’t know how it relates to our life and work. In fact, service trade is right beside you and me. For example, watching an imported "blockbuster" in the cinema belongs to personal cultural and entertainment services; The cost of sending epidemic prevention materials to overseas friends belongs to transportation services. More comprehensively, service trade is the abbreviation of international service trade, which refers to the economic activities of transnational exchange with services as commodities, and the core is the service transaction with capital, labor and knowledge and technology as the basic elements.
Compared with traditional trade, service trade has at least the following characteristics, which is also the difference from traditional trade in goods.
One is invisibility and diversity. The subject matter of service transaction is usually intangible, but the intangibility of service trade is not absolute, because many services have been materialized, such as consultancy reports or software on disk. It is difficult to standardize the subject matter of service trade transactions, and it also presents diversified characteristics. For example, technology trade, as one of the contents of service trade, is subject to patents, trademarks, copyrights and know-how. The second is the synchronization of production and consumption. In general, the provision and consumption of service products in the international market are inseparable, and the process of service provision is the process of service consumption, except that service providers and consumers have different nationalities, and cross-border flow of service products is realized through commercial existence or the movement of natural persons, while the production and consumption of tangible goods can deviate in time and space. Of course, the emergence of digital service trade makes the production and consumption of service trade partially separated. Third, protection is more concealed and flexible. Because of the particularity of service trade objects, traditional tariff barriers can’t play a role, so the protection of service trade usually takes the form of non-tariff barriers, which is more subtle. The fourth is the complexity of supervision. Because service trade involves many industries and the management of personnel flow, the rules of service trade are more complicated and more difficult to manage.
Driven by the policy dividend and the development of digital economy, China’s service trade has continued to grow rapidly, showing remarkable characteristics of both quantity and quality, and showing a good development momentum in terms of trade scale, trade structure and competitive strength.
The scale of China’s cross-border trade has continued to grow rapidly, ranking second in the world for many years in a row, and its status as a big country in service trade has been further stabilized. From 2012 to 2021, China’s total import and export of services increased from US$ 482.9 billion to US$ 821.2 billion, and the trade scale increased by 70.1%. The service trade deficit kept shrinking, reaching the lowest value in recent years. Since 2020, China’s service exports have grown faster than imports, and the rapid growth of export scale has further reduced China’s service trade deficit. In 2021, China’s service trade deficit was only $32.7 billion; Affiliated service trade is an important part of international service trade. The combination of affiliated service trade data and cross-border service import and export data can more comprehensively reflect the development of a country’s service trade and systematically show a country’s ability and level of providing international services. In June 2017, China released the statistical data of China’s affiliated service trade for the first time, becoming one of the few countries in the world that can simultaneously publish the statistical data of cross-border service trade and affiliated service trade.
China’s service trade structure has been steadily optimized, the proportion of knowledge-intensive service trade has increased, and the advantages of traditional service trade have been further stabilized. From 2012 to 2021, the import and export structure of traditional fields, knowledge-intensive fields and other fields changed from 61∶34∶5 to 52∶43∶3, and knowledge-intensive service trade has become a new engine to enhance service export capacity and stabilize foreign trade growth. The trade advantages in traditional fields continue to be maintained, and transportation services have become the largest field of service trade in China. From 2012 to 2021, China’s total service trade in traditional fields maintained a steady growth trend, and the import and export volume increased from $292.64 billion to $436.5 billion. Since 2020, China’s transport services have surpassed travel services to become the largest field of service trade. In the first half of this year, the total trade in transport services was 1,047.62 billion yuan, accounting for 36.2% of the total trade in services, reaching a record high.
China’s service trade development index has risen rapidly, and its competitive strength tends to increase. According to "Global Service Trade Development Index Report 2021" issued by the Research Institute of the Ministry of Commerce, China’s service trade development index rose from 20th to 14th. There are several reasons for the change of the index: First, under the impact of the COVID-19 epidemic, the structure of China’s service trade has changed, and the service trade with travel services as the main import has been greatly affected. Second, the global trade in services has been generally impacted, but due to the differences in the structure of trade in services among economies, the impact on trade in services among economies is different. Countries or economies with knowledge-intensive structure are relatively less affected, while countries or economies with travel as the main structure are relatively more affected. Third, China’s continuous deepening of reform and opening up, the promotion of the construction of a free trade pilot zone, the continuous optimization of the business environment, and the continuous consolidation of the service industry foundation have become the main internal factors for the relative stability of China’s index.
Digitalization leads innovation and development.
Moderator: What progress has China made in the digitalization of service trade at present?
Wang Xiaohong (Deputy Director and Professor, Scientific Research and Information Department, China Center for International Economic Exchange):Digital trade is the leader of trade innovation and development, and it is also the focus for countries to compete for the commanding heights of international trade competition strategy and the dominance of rulemaking. China attaches great importance to the development of digital trade, constantly improves the promotion policies, speeds up the construction of digital infrastructure, continuously improves the opening level of service trade, enriches various open pilot platforms, and creates a favorable environment for the development of digital trade. The export scale of digital services has continued to expand, new formats and new models have developed rapidly, and the innovation ability and international competitiveness of digital enterprises have been greatly improved. Digital trade plays an increasingly important role in promoting trade growth, optimizing trade structure, driving trade innovation and promoting college students’ employment.
As the most dynamic stage of global digital trade, China has many bright spots in the development of digital trade. First, the export advantages of the new generation of information technology services are obvious, which strongly supports the informatization construction of developing countries in the "Belt and Road". The export of network and information security, artificial intelligence, integrated circuit design, information technology solutions and cloud computing services maintained a high growth. In 2021, the number of patents granted for blockchain technology will account for more than 50% of the world, and cooperation with countries along the Belt and Road will be increasingly extensive in the fields of cross-border trade, digital currency and qualification certification. Second, the export capacity of digital products has been enhanced, which has become an important carrier for spreading Chinese culture and enhancing exchanges among countries around the world. In 2021, the overseas sales revenue of China’s self-developed games increased by 16.6% year-on-year, and TV dramas were exported to more than 200 countries and regions, becoming the sixth largest digital music market in the world. Third, the level of service outsourcing participating in the global value chain division of labor has been continuously improved, which has driven the growth of producer services exports. In 2021, the execution amount of offshore service outsourcing in China was US$ 130.3 billion, up by 23.2% year-on-year, among which the execution amount of information technology outsourcing, business process outsourcing and knowledge process outsourcing accounted for 42.2%, 15.2% and 42.5% respectively, up by 13.3%, 11.1% and 25.3% respectively. Knowledge-intensive services such as management consulting, new energy technology research and development, information technology solutions, industrial design, medicine and biotechnology research and development have grown rapidly. Fourth, the cross-border e-commerce platform has significantly enhanced the pulling effect on trade in goods.Promote the rapid improvement of the level of trade digitalization. In 2021, cross-border e-commerce realized the import and export of goods of 1.92 trillion yuan, a year-on-year increase of 18.6%. In addition, the international market for digital payment is expanding rapidly, and WeChat and Alipay are used by more countries. The cross-border flow of data in China accounts for about 23% of the world. It is estimated that in 2025, China’s data circle will account for 27.8% of the world and will become the largest data circle.
At present, the development of a new generation of global digital technology and the accelerated digital transformation of enterprises have made the international market for digital trade development increasingly broad. Although China’s talent structure is rich and diverse, its digital infrastructure is world-leading, and its digital technology innovation ability is increasing day by day, it still faces some problems, such as the degree of digitalization of service trade is lower than the global average, and the strength of digital technology and digital enterprises lags behind that of developed countries.
Therefore, China should take independent innovation as the guide and high-level opening as the driving force to promote the high-quality development of digital trade.
The first is to promote the growth of new technologies, new formats and new models. The new generation of digital technologies such as 5G, cloud computing, big data, artificial intelligence, blockchain, etc. can continuously expand the tradeable boundaries of services, give birth to new formats and new models, and improve relevant policy design. Promote the integration of digital technology with finance, insurance, culture, education and other fields, accelerate the penetration into traditional fields such as tourism, transportation, construction, processing and maintenance, continuously improve the level of digital service delivery, develop remote service models, and promote the cross-border e-commerce platform to transform and upgrade to the integration of goods trade and service trade.
The second is to make digital platform enterprises bigger and stronger. Taking cultivating internationally competitive digital platform enterprises as the top priority, relying on platform enterprises to build a global, open and innovative digital ecosystem, giving full play to the advantages of data resource integration of platform enterprises, providing services for small and medium-sized trade enterprises, creating a data system that connects the supply side with the demand side, forming a data open sharing mechanism and a data-driven innovation development model, and exploring an inclusive supervision mechanism for platforms.
The third is to promote institutional openness to the digital trade rules of elevation standards. Digital trade rules have become the most active field in the innovation and reform of international economic and trade rules. China needs to take the initiative to standardize international economic and trade rules, promote deep-seated reform and promote high-quality development with high-level opening. It is necessary to continue to reduce the negative list, expand the market access of knowledge-intensive service industries, remove restrictions such as the ratio of foreign shares and the nationality of managers, and promote the flow of natural persons and facilitate the cross-border flow of data. Build a high-standard intellectual property protection system to provide a good environment for attracting global digital technology, enterprises and talents.
The fourth is to build a "digital silk road" with high quality to promote international cooperation in the digital economy. Strengthen the "One Belt, One Road" related countries’ soft connectivity of digital trade rules and standards, and jointly build a digital governance system. By promoting the implementation of RCEP digital trade rules, we will improve the governance system of digital trade rules in China and lay the foundation for joining other international trade agreements. Promote the upgrading of free trade agreements such as ASEAN, China and South Korea, strengthen the signing of bilateral and regional digital economy partnership agreements with developed economies, carry out digital technology research and development and standard cooperation, provide a favorable external environment for enterprises to expand the international market, and also contribute more China wisdom and Chinese strength to the development of global digital economy and digital trade.
Remarkable achievements have been made in deepening reform and opening up
Moderator: What specific measures does China have to deepen the reform and opening up of service trade? What results have been achieved?
Yang Changyong (Researcher, Institute of Foreign Economic Research, China Macroeconomic Research Institute):Service trade is an important part of China’s foreign trade and open economy, and it is an important trend of international trade development under the background of a new round of scientific and technological revolution and industrial transformation, and the continuous impact of COVID-19 epidemic. In recent years, in accordance with the requirements of high-quality economic development, China has persisted in deepening the reform and opening up of service trade, which has promoted the development, prosperity and structural optimization of service trade, which has not only made important contributions to China’s foreign trade stability and opening up, but also played an important role in the recovery of world economy and trade.
Continue to relax market access for service industries. After China’s accession to the World Trade Organization in 2001, the service market was widely opened as promised, the entry threshold for foreign investment in the service sector was gradually lowered, the geographical and quantitative restrictions in the service sector were cancelled on schedule, and the business scope of allowing foreign investment in the service sector was continuously expanded. Among the 160 sub-sectors of the 12 categories of service sectors classified by the WTO, China has promised to open 100 sub-sectors in 9 categories, which is close to the average level of 108 sub-sectors promised by developed member countries. Since 2017, China has implemented a negative list of foreign investment access throughout the country. In the 2021 version of the negative list, there are only 23 special management measures for foreign investment access in service industries, which is significantly lower than that in 2017.
Vigorously promote the opening of cross-border service trade. Opening service trade through negative list is the main opening mode of international high-standard economic and trade agreements in the field of cross-border service trade, and it is also an important trend in the evolution of international economic and trade rules. In 2021, China issued the first negative list of cross-border service trade applicable to Hainan Free Trade Port, and defined 70 special management measures in 11 categories, which exceeded China’s WTO commitments and was higher than the major free trade agreements that have entered into force in China at present.
Create a high-level service trade reform and opening-up platform. Beijing, Tianjin, Shanghai, Hainan, Chongqing and other provinces and cities have formed a "1+4" comprehensive pilot pattern for expanding and opening up the service industry. Among them, Beijing has successively implemented three rounds of pilot programs, and is currently upgrading to build a comprehensive demonstration zone for expanding and opening up the national service industry, and building a free trade pilot zone with scientific and technological innovation, service industry opening and digital economy as its main features. Since 2016, China has set up 28 pilot areas for innovation and development of service trade in three batches. In 2020, the implementation rate of specific measures for comprehensively deepening the innovation and development of service trade has exceeded 90%, and these pilot areas have become the highland of service trade development. Since the "Thirteenth Five-Year Plan", the number of service outsourcing demonstration cities in China has increased from 21 to 37, which has played an important role in demonstrating and leading the high-quality development of the national service outsourcing industry. In recent years, China has set up a number of export bases with national characteristics in the fields of culture, Chinese medicine services and digital services, which has played a role in promoting the export of related services.
The scale of service trade has expanded significantly and has become an important force to stabilize foreign trade in China. During the "Thirteenth Five-Year Plan" period, China’s total import and export of services increased by 29.7% compared with the "Twelfth Five-Year Plan" period, and its position as the second largest country in global service trade was further consolidated. Last year, China’s total import and export of services was 5.3 trillion yuan, a year-on-year increase of 16.1%; In the first half of this year, it increased by 21.6%. Under the situation that the world economy and international trade continue to be weak and the external environment is complex and severe, China’s service trade is booming and making important contributions to the stable development of foreign trade. In the first half of this year, the growth rate of service import and export exceeded that of goods import and export by 12.2 percentage points, which will become an important driving force for maintaining stability and improving quality of foreign trade this year.
The continuous optimization of service trade structure has become an important driving force for China’s industrial transformation and upgrading. The structural reform of the supply side of the service industry was further promoted, and the competitiveness of service exports was significantly enhanced. During the "Thirteenth Five-Year Plan" period, the proportion of service exports in service trade increased by 9 percentage points. Knowledge-intensive services such as insurance services, financial services, telecommunications computer and information services, intellectual property royalties, personal cultural and entertainment services and other commercial services continued to grow rapidly. Excluding 2020, which is adversely affected by the epidemic, the import and export of knowledge-intensive services will increase by 11% annually from 2015 to 2019, contributing 70.9% to the growth of service import and export. In 2021, the export of personal cultural and entertainment services, intellectual property royalties, telecommunications computers and information services increased by 35%, 26.9% and 22.3% respectively. In the first half of this year, the export of knowledge-intensive services increased by 13.1% year-on-year, 7.2 percentage points higher than the import growth rate.
The active innovation of service trade system has become an important boost for China to build a new open economic system with a higher level. All kinds of service trade reform and opening-up platforms are in line with international high-standard economic and trade rules, persist in bold trials and bold ventures, and have accumulated rich experience in promoting the liberalization, facilitation and innovation and development of service trade. For example, xiong’an new area focuses on the integration of "digital+finance" innovation, and carries out the digital RMB pilot in depth, laying a solid foundation for the development of digital trade; Beijing’s construction patent application gives priority to the review and recommendation of online green channels, which effectively promotes the transformation of innovation achievements; Suzhou has promoted the identification of international professional qualifications and domestic professional titles, which has strongly supported the opening of key industries such as biomedicine; Guangzhou established Hong Kong and Macao Children’s School, which enhanced the attraction of high-end professional service talents in Hong Kong and Macao. These institutional innovations not only enhance the development momentum and competitiveness of service trade, but also become an important exploration for China to build a new open economic system at a higher level, which provides an important boost for high-level opening up.
Actively respond to new opportunities and challenges
Moderator: What are the problems, opportunities and challenges in the development of China’s service trade? What should we focus on?
Zhao Jin (Researcher national academy of economic strategy):Although the scale of China’s service trade has been ranked second in the world for many years, and the status of service trade in international trade has been continuously improved, there are still some shortcomings in service development.
First, international competitiveness needs to be strengthened. Software and information services are at the low end of the industrial chain, and basic software, industrial software and key core technologies are still subject to developed countries such as the United States. Compared with developed countries in Europe and America, transportation services, telecommunication services, financial services and cultural services are less competitive. There is a long-term deficit in education services and travel services.
Second, the digitization level of service trade is not high. United Nations trade statistics show that in 2020, China’s digital service trade exports accounted for 55.1% of the total service trade exports, far below the world average (63.55%), the United States (75.55%) and Germany (65.55%).
Third, the openness of the service industry needs to be further improved. According to the service trade restriction index of the Organization for Economic Cooperation and Development, among the 50 economies in the world, in 2021, China’s service trade restriction index ranked ninth. Among them, the restrictions on foreign investment access rank fourth in the world.
Fourth, the service trade management system and mechanism need to be further improved. Although the six-year service trade innovation pilot has made progress, the construction of cross-border service trade negative list management system, promotion system, supervision system, statistics system and safety system still has a long way to go.
At the same time, China’s service trade development is also facing new opportunities and challenges.
In terms of opportunities, digital technology has achieved a breakthrough in non-tradable services, and the future development of service trade has broad prospects. 5G technology makes telemedicine, online education, online marketing and other services tradeable, and new service trade formats based on digital technology have emerged, such as digital games, digital publishing, digital audio-visual applications, mobile application services, network services, content software, etc. The scale and structure of service trade development will undergo tremendous changes in the future.
The liberalization of service trade has been accelerated, and the pace of service globalization has been accelerated. For more than 20 years, the Doha negotiations have been struggling, but significant progress has been made in plurilateral and regional negotiations. More than two-thirds of the agreements concluded in the past 10 years contain rules on trade in services, and high-level liberalization of trade in services is implemented with negative lists as the mainstay. By the end of 2021, the negotiations on the domestic regulation agreement of the World Trade Organization’s service trade, which was attended by 67 member countries, were successfully completed. Eighty-six members of the World Trade Organization, including China, the European Union and the United States, are formulating global rules for cross-border electronic commerce.
The center of gravity of the world economy has moved eastward, and the market potential of service trade development is huge. In recent years, China’s economic growth is pushing the focus of the world economy eastward. From 2019 to 2020, despite the global recession caused by the global epidemic of COVID-19, the economy in Asia still maintained a good growth momentum. In 2020, Asia’s economic aggregate will account for 47.3% of the world’s total, and its share in international service trade will increase to 30.6%. China is located in the center of the Asian value chain. With the eastward shift of the center of gravity of the world economy and the mass rise of developing countries, the market potential of China’s service trade development is huge.
In terms of challenges, the double epidemic situation of COVID-19 and monkeypox is superimposed, and the cross-border flow of factors is restricted. Compared with the trade in goods, the epidemic situation has a greater impact on the trade in services. Apart from cross-border delivery, commercial existence, cross-border consumption and the movement of natural persons are all affected by epidemic control in various countries. Strengthening the resilience of supply chain will remain a difficult problem for the development of global trade.
The U.S. government’s mandatory decoupling and chain breaking policy hinders the development of the global digital economy. Recently, the Chip and Science Act of 2022 issued by the US government will cause great distortion to the global semiconductor supply chain, and the "Indo-Pacific Economic Framework" will disrupt the normal international trade order. It is expected that information services and the global digitalization process will be affected.
The continuation of the Ukrainian crisis may trigger the risk of world economic recession. International organizations such as the United Nations, the International Monetary Fund and the Organization for Economic Cooperation and Development have generally lowered their world economic growth expectations in response to the rising prices of food, fuel and fertilizers, increasing financial instability and complex global supply chain restructuring caused by the crisis. The report of UNCTAD pointed out that the impact of the Ukrainian crisis on global trade and development will have a huge impact on the world economy.
To actively respond to opportunities and challenges, we should strive to make efforts from the following aspects.
First, seize the new opportunities for digital development of services brought about by digital technology, and accelerate the new round of pilot innovation and development of service trade. In the future, the innovation and development direction of service trade should focus on digitalization, focus on establishing a new digital supply chain ecosystem, and accelerate the digital transformation of enterprises, digital governance of governments and digital cooperation of countries.
Second, seize the opportunity of restructuring the service trade rules and comprehensively deepen the reform. The reconstruction of contemporary international economic and trade rules involves a country’s domestic economic system and market economy system. China should comprehensively deepen reform, implement institutional innovation, improve the quality and level of the system, establish a modern market economy system, and improve the intellectual property protection system, investor legal protection system, property rights system, regulatory evaluation and coordination system. At the same time, strengthen the coordination of international rules and international regulatory cooperation, promote international cooperation through mutual authentication and the use of international standards and regulations, and break down the regulatory barriers of service trade exports.
Third, seize the opportunity of the group rise of developing countries and actively explore the European and Asia-Pacific markets with the focus on the "Belt and Road". The global service trade market is mainly concentrated in Europe and the Asia-Pacific region, and the future market potential is mainly in developing countries. The "Belt and Road" is a new platform for international cooperation connecting Eurasia, and most countries are developing countries with broad market space for international service trade development. Focusing on the "Belt and Road" and actively exploring markets in Europe and the Asia-Pacific region will effectively empower China’s service trade to achieve leapfrog development.
