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Thursday, September 13, 2018

China’s Service Sector Will be Major Focus of Reform and Opening-up, says PBoC Official

September 12, 2018. Shanghai – CEIBS Professor of Economics and Finance, Sheng Songcheng, who is also former Director General of the Financial Survey and Statistics Department at the People’s Bank of China (PBoC) and Counsellor to Shanghai Municipal Government, anticipates that the country’s service industry will be a major focus as China pushes ahead with reform and opening up. In fact, he said, China had itself taken initial steps, before the current trade war with the US, to open up the increasingly important service sector; but the results will take time to become evident. 

He also spoke of the service sector’s “huge growth potential”, saying it will “rise in status as the economy develops”. “There has been steady progress in China’s efforts at urbanisation. I expect to see more pent-up demand from the service industry in the future,” he said. Meanwhile, with the upgraded living standards seen in the major cities, urban residents will also continue to spend on areas such as travel, education, healthcare, home purchases etc., he added. 

Prof. Sheng, who is also Executive Deputy Director of the highly-regarded think tank CLIIF, was speaking to members of the European Union’s diplomatic community in Shanghai and business executives during this evening’s forum on Sino-EU Cooperation. The venue was CEIBS Shanghai Campus. The event is part of CEIBS’ efforts, on the 15th anniversary of the China-EU Comprehensive Strategic Partnership, to fulfil its role as a platform to further enhance China-EU communication and cooperation, both in business and culture, along with providing a window of China's reform and opening up in the education sector.  As CEIBS Vice President & Dean Professor Ding Yuan explained, today's event was a way to share CEIBS' wealth of knowledge with the European diplomatic and business communities in China.  

In his speech, Prof. Sheng laid out the current situation in China’s service industry, the challenges being faced, and then offered suggestions on how to deepen the on-going reform and opening up. With an abundance of data to back up his argument, he told the audience that, even though the official numbers show that the service sector is growing (accounting for 54.3% of GDP in the first half of this year), in his personal opinion, its real contribution to the country’s overall GDP may be even greater than is being reported. China’s aggregate GDP might be underestimated due to an underestimation of its service industry, he said.

Turning his attention to the challenges facing the service sector, he pointed out that an aging population would nevertheless bring opportunities for the insurance industry. “An aging population is the new reality facing us and what is badly needed in this scenario is services,” he said. “We need to pay attention to the high-potential insurance sector and introduce reform measures.”   

He also framed his support for deepening reform and opening up of the service sector within the context of the positive impact such a move would have on the country’s exchange rate and trade balance. Pointing out that the largest share (38%) of FDI went to real estate between 2012 and 2016, he spoke of the need to have more of these funds – as well as domestic investment – flowing into education and healthcare, both of which saw almost no investment from FDI over the same period. 

He ended by reminding his audience of measures the Chinese government has already taken to open up the country’s service sector: formulated a concrete plan to phase out foreign equity caps in all financial sectors by 2021; the elimination of restrictions on foreign investment in railway passenger transportation, international marine shipping and international shipping agency; and a lifting of the ban on foreign investment in business premises for internet access services – all from the Negative List released on June 28.  He also spoke of measures already taken by Shanghai to open up the country’s service sector to foreign and domestic investors in the financial sector, the automobile, aircraft and shipbuilding industries, as well as healthcare, complemented by strengthening the protection of intellectual property and optimising the environment to make it easier to do business in and with China. 

“China has opened to the world in many areas but the service industry will become the main focus,” he said. “The industry enjoys promising prospects and welcomes investors from home and abroad to share the fruits of the reform and opening-up policy.”

Prof. Sheng was one of the keynote speakers during the day’s event which also included a speech by CEIBS Associate Dean & Professor of Management Juan Antonio Fernandez who explored how to do business in and with China in the years ahead. There was also an address by Jacques Godfrain, President of the Charles de Gaulle Foundation, which worked with CEIBS on the event. Today’s forum was the first of two planned for the European diplomatic community in China. The next event will be in Beijing on September 21.

Writer: 
Charmaine N. Clarke