China will set up its first governmental guiding fund in service trade field. Journalist of the Economic Information Daily recently learnt from the industry that relevant departments, including the Ministry of Finance (MOF) and the Ministry of Commerce (MOC), are mulling on setting up a special guiding fund to boost the development of service trade and guide the export of services. The guiding fund, jointly set up by the MOF and relevant financial institutions, expects to see a fiscal investment of 5 billion yuan from the central government. Social capital will be introduced and the size of the fund will reach around 30 billion yuan.
Jiang Zhen, a researcher with the National Academy of Economic Strategy, CASS, remarked that governmental guiding fund refers to that the government sets up a parent fund with several sub-funds, and sub-funds are established in cooperation with social capital. Such model avoids the shortages of previous gratuitous fiscal expenditure and boosts the activeness of social capital.
Li Jun, deputy head of the Service Trade Research Institute under the MOC, indicated that it is the first guiding fund in China’s service trade field. In his eyes, two positive results will be produced by supporting the development of service trade through guiding fund. Firstly, the input of a small amount of fiscal fund can attract the participation of financial institutions and other social capital, thus the size of funds supporting the development of service trade will be expanded. The strength of fiscal funds is limited anyway, but the size of funds supporting the development of service trade can be expanded by establishing guiding fund. Secondly, with the participation of social capital and financial institutions, the operation of the fund will be more market-oriented and the use efficiency of the fund will be improved.
It is learnt that in recent years, China’s service trade experiences strong growth while the growth of goods trade declines. Data announced by the MOC shows that China’s total export-import volume of service trade climbed from 362.4 billion US dollars to 713.0 billion US dollars during the 2010-2015 period, representing an average annual growth of 14.5 percent which is 2 times of the global average growth in the same period.
China’s total export-import volume of service trade during the January-October period of 2016 amounted to 4,291.5 billion yuan, representing a year-on-year growth of 16 percent. To be more specific, the export and import of services recorded a year-on-year growth of 3.6 percent and 23.7 percent, respectively. Service trade makes bigger and bigger contribution to foreign trade in China. Service trade during the January-October period of 2016 took up 18 percent of foreign trade in the same period, 2.6 percentage points higher than that of 2015. All these data suggest the huge momentum and potential behind the development of China’s service trade.
It is the same around the world. The average annual growth of global service trade was 2 times of that of goods trade during the 2008-2014 period. Chi Fulin, director of the China Institute for Reform and Development (Hainan), told the journalist that under the new changes of economic globalization, China practices free trade strategy and lays focus on service trade. The change from goods-oriented trade to service-oriented trade points an important direction of the new round of economic globalization.
But Chi also pointed out that in 2015, the proportion of China’s service trade among foreign trade was about 8 percentage points lower than global average and over 10 percentage points lower than that of developed countries. Although it rose by about 3 percentage points in 2016, China was still far behind the developed countries.
“The proportion of China’s service trade among foreign trade is still lower than the global average 22 percent, and China’s service exports only account for 6 percent of the global exports, far lower than the U.S.” Li pointed out that although China’s service trade grows faster, it still falls behind goods trade on the whole and becomes weakness of China’s foreign trade.
In addition, there is also distortion in structure of service trade industry. Firstly, trade deficit exists for a long time. Secondly, in terms of exports, travel (including travel and study abroad) exports accounts for nearly half of the service trade and potential of other industries needs to be developed. “Though travel is the biggest industry in service trade in the world, its weight isn’t more than 25 percent.” Li pointed out that it is very necessary to achieve transformation and upgrading as soon as possible and quicken development of service trade, because it not only accords with the development trend of global economic servitization but also will further boost upgrading of China’s manufacturing industry.
Based on this, service trade begins to see policies frequently released in recent years. The State Council issued several opinions on accelerating development of service trade in 2016, proposing that by 2020, the total volume of service imports and exports of China will exceed 1 trillion U.S. dollars, the proportion of service trade in foreign trade will increase further and proportion of service trade in the world moves up year by year. Afterwards, the State Council approved to conduct pilot of innovative development of service trade in 15 provinces and cities (or regions) including Tianjin, Shanghai for two years.
It is learnt that the pilot begins to take effect after one year. MOC has released guidance catalogue for key fields of service exports together with other related departments and actively promotes to ensure introduction of policies in terms of five aspects including fiscal, taxation, finance, funds and facility. The MOC conducted two surveys about pilot situation during the end of last year and beginning of this year and now is studying and formulating comprehensive evaluation index system for pilot work of innovative development of service trade.
As for outlook of development of service trade in this year, Li said although many policies have been launched, some policies haven’t been put in place yet. The focus of service trade in 2017 will be laid in implementing, executing, evaluating and summarizing the policies. It should bring better effect of policies by solving problems. “On the whole, it will make enterprise feel more sense of gain through strengthening implementation and promotion of existing policies. Several policies which were introduced last year will achieve effects in 2017. In addition, with guidance funds of government, service trade development will undoubtedly benefit from policy dividends this year.”
Translated by Jennifer and Vanessa