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Faster service growth

(China Daily)
Updated: 2008-04-12 09:54

The recent upward revision of the country's growth figures indicates that the service sector has been expanding more rapidly than originally thought.

This is good news for policymakers, who have been eager to boost the development of the sector. But if we consider their stated goal of raising the sector's share of the gross domestic product (GDP) by 3 percentage points between 2006 and 2010, the slight increases recorded in the past two years provide very small comfort.

The National Bureau of Statistics on Thursday revised the GDP growth rates in 2006 and 2007 by 0.5 percentage points to 11.6 percent and 11.9 percent respectively. The growth rates for agriculture and industry remained unchanged, which means the revisions basically reflect the level to which analysts have underestimated the expansion of the service sector.

Policymakers know that the service sector must grow at a faster rate to ensure that the economy grows in a sustainable way over the long term. Since the service sector is less polluting and more energy-efficient than heavy industry, which currently accounts for about half of the economic growth, the increase of the service sector's contribution to the economy will have a positive effect on overall energy efficiency.

Previous statistics showed that, though it grew at the fastest pace in a decade last year, the service sector has still expanded at a slower rate than the overall economy, leading to an embarrassing decline of the sector's share of GDP by 0.3 percentage points.

That partly explains why China only managed to reduce its energy per unit of output by 3.27 percent last year after two years of intense energy-saving campaigns.

However, the revised statistics paint a rosier picture than was previously assumed. The growth of the service sector actually outpaced that of the economy, increasing its share of GDP by 0.1 percent last year.

Such a shift in the pace at which the country's industrial structure is changing gives an important boost to policymakers, who have tried hard to usher in an era of service-led growth. It shows that the measures they adopted actually worked.

Yet, the overall underdevelopment of the service sector permits little optimism.

According to the World Bank, the service sector's share of global GDP is about 60 percent, and tops 70 percent of the GDPs of some developed countries. Even after the upward revision, China's service sector still only accounts for 40.1 percent of the country's GDP.

Policymakers still have a lot to do to build the sector into a powerful engine for sustainable growth.