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Policy Suggestions on Promoting the Development of China’s Service Industry in Quantity and Quality During the 13th Five-Year Plan Period


By Ren Xingzhou, Wang Wei & Liu Tao

Research Report Vol.18 No.1, 2016

I. New Circumstances and Requirements for the Service Industry Development During the 13th Five-Year Plan Period

During the 13th Five-Year Plan period, China’s national economic and social development will face a series of profound adjustments unseen in the past. For the service industry development, these adjustments will bring about challenges and opportunities as well as stresses and driving forces.

1. Internal requirements for accelerating the cultivation of new economic growth areas and driving forces at the new stage of development

It is the main underlying guideline that China should take the initiative to proactively adapt to and lead the new normal in the economic development process during the 13th Five-Year Plan period and beyond. The new normal of economic development indicates the slowdown of China’s economic growth, and also reflects the transformation of economic development mode, growth drivers, and economic structure. That is, the economy will be transformed from extensive growth with large scale and high speed to intensive growth with quality and efficiency; the driving forces for economic growth will be found in new growth areas instead of conventional ones; the economic structure will be adjusted from focusing on expansion in quantity and capacity to in-depth restructuring which lays emphasison inventory adjustment, quality improvement and quantity expansion in an aim to slow down economic growth rate but improve economic growth quality.

It is predicted that China’s GDP per capita will increase from the current 11,000 international dollars to 15,000 international dollars[] in the 13th Five-Year Plan period, and the service industry will gear up. Thus, in this period, the fast development of the service industry helps drive economic growth, which in turn will promote the sustainable and steady development of China’s economy in the new normal.

2. It is the pressing demand for the service industry to accelerate development in order to basically realize industrialization and promote the transformation and upgrading of the manufacturing industry

During the 13th Five-Year Plan period, China will accelerate its transition to the later stage of industrialization and almost complete the historical mission of realizing industrialization. In this process, industrial expansion in quantity will be shifted to upgrading in quality so as to promote the “Made in China 2025” strategy. To further this end, it is imperative to increase the value-added and competitiveness of manufacturing, and to contend for the high end in the global industry chain. All these are dependent on the strong support of the service industry, especially of the service sector for production.

First, with the constant differentiation within the industry, the proportion of labor-intensive manufacturing industry and resource-intensive heavy chemical industry will continue to decline, while the proportion of capital- and technology-intensive manufacturing industry will have a prominent increase. This change will exercise great impacts on the demand for service industry, making capital- and technology-intensive manufacturing depend more on knowledge-intensive service for production such as commercial services, financial insurance, and technology development, etc. In the meanwhile, small-volume, multi-batch and differentiation will be increasingly prominent in production, which also makes new and more specialized intermediate demands for producer service. This trend will facilitate to foster new development pattern where service industry takes the lead, and also integrates with manufacturing.

Second, China’s comparative advantage of low-cost manufacturing industry is on the wane. Under this circumstance, it’s a must to improve factor endowment structure as soon as possible, and form new comparative advantages at higher level. It requires that China should develop service industry vigorously in the areas like R&D, education, finance and information. High-level innovative elements should be used to foster the inexhaustible driving force for the transformation and upgrading of the manufacturing industry and for the transformation of industrial structure from low-end to mid and high-end.

Besides, with the severely aggravated environment pollution and international commitment of energy conservation and emission reduction, we must accelerate the green transformation of manufacturing industry. In order to improve energy efficiency and establish green, circular and low-carbon production mode, China should accelerate the development of industries featuring high-tech and energy-saving services.

3. Demographic changes pose challenges and create opportunities for the service industry development

In the 13th Five-Year Plan period, China will see greater structural changes while maintaining a low growth rate of population. On the one hand, the share of working-age population falls in the total population, while that of the elderly rises up quickly. According to the UN forecast, by 2020, China’s population aged 15 to 64 will be more than 1 billion, accounting for 70.1% of the total population. However, compared with the current figure, the forecasted number will fall by a net reduction of 10.56 million, and the proportion will decline by 2.3 percentage points. At the same time, the elderly over the age of 65 will be close to 170 million, about 11.7% of the total, and up by 2.2 percentage points from now. At that time, one in four elderly people in the world will be Chinese. On the other hand, the quality of labor force improves further. It is expected, by 2020, the main working age population and the newly-added labor force will have education of 11.2 years and 13.5 years on average, respectively, up by 1.6 and 0.8 years, respectively, compared with the current level. The gross enrollment ratio of higher education will reach 40%, with about 200 million people with higher education, an amount equivalent to the total population of Brazil now.

The structural change in population will greatly impact the development of service industry through supply and demand. To be specific, as population ages at a faster pace, and with the increase of the empty-nest families, people will pay more attention to life and the quality of living, thus having new demands in terms of the existing services and how they are provided. It is worth noting that the elderly population, in fact, is constantly changing. Comparatively speaking, the elderly in their early 50, the so called “post-50s”, have certain consumption ability. They are more likely to accept the new way of consumption, which helps create new social service demand, and promote the restructuring and upgrading of the service industry. In addition, in the process of transitioning from a country of large population to one of great human resources, we should pay more attention to giving priority to investing in human resources, which helps expand the scale of high-end human capital so as to provide sustained intellectual support for the development of China’s service industry. ...

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