Unlock the potential of services sector

During his inspection tour in Beijing last week, China's top political adviser Jia Qinglin stressed the development of the services industry, echoing the head of the national economy planning body's announcement that the development of the sector lags behind the demand generated by China's fast economic growth. Zhang Ping, director of the National Development and Reform Commission, has vowed to implement more favorable policies aimed at boosting the services sector's development under the 12th Five Year Plan (2011-2015).

A well-developed services sector plays a major role in improving production efficiency and promoting technical progress and innovation. In developing economies, the adequate provision of services, especially transportation, telecommunications, logistics and financial services, is a prerequisite to ensure and sustain economic growth. In developed economies, services have become the primary source of output and employment, accounting for about 70 percent of GDP and 60 percent of total employment.

The services sector has expanded rapidly in China since economic reform was launched some three decades ago, particularly after China joined the World Trade Organization (WTO) in 2001, but their size appears to be smaller than expected based on China's income level.