"Growing Chinese Service Industry Market Should Be Seen as an Opportunity for Business Expansion"

Korea Institute for Industrial Economics and Trade 'Trends and Implications of the Service Sector in China's Economy'
Service Industry Emerges as a Driving Force of China's Economic Growth
Value-Added Share in GDP Expanded to 52.2% in 2018

[Asia Economy Reporter Kim Bo-kyung] A report has been released stating that our companies need to actively prepare to utilize the Chinese service market as a new opportunity for expansion.

On the 27th, the Korea Institute for Industrial Economics and Trade (KIET) announced in its report titled "Trends and Implications of the Service Sector in the Chinese Economy" that "China's service industry is emerging as a major sector supporting the Chinese economy in terms of both added value and employment," and "this is expected to create new opportunities for foreign companies to enter the market."

Since the reform and opening-up in 1978, China's service industry has steadily grown alongside the overall development of the Chinese economy, with its added value expanding more than 500 times nominally and more than 50 times in real terms.

The share of the service industry's added value in the Gross Domestic Product (GDP) increased more than twofold from 24.6% in 1978 to 52.2% in 2018, and in 2012, the service sector's share surpassed that of the secondary industry for the first time.

Regarding the contribution rate to GDP growth, since 2013, the service industry has exceeded the growth contribution rate of the manufacturing industry, rising to 59.7% in 2018.

The proportion of employment in the service industry increased from 12.2% in 1978 to 46.3% in 2018. KIET stated, "Although the employment share of China's service industry is still low compared to major advanced countries and BRICS countries excluding India, this indicates that the Chinese service industry has potential for continuous growth in the future."

The recent expansion of the Chinese service market signifies the creation of new opportunities for foreign companies, so it is analyzed that our companies also need to respond proactively.

The institute said, "Economic exchanges between Korea and China, especially entry into the service sector, can be significantly affected by political and military risks," and "it is necessary to actively utilize joint venture and partnership investment methods that can minimize these risks."

Furthermore, it suggested, "It is necessary to carefully review various support systems and deregulation measures included in China's recently implemented 'Foreign Investment Law' and 'Catalogue for the Encouragement of Foreign Investment Industries' and establish investment strategies by sector and region."