China’s services sector: the new engine of economic growth.

This paper presents a review of services sector development in China. It is found that China’s services have recently emerged as the dominant contributor to economic growth and job creation. Trade in services has also increased dramatically, although China maintains a huge deficit. In comparison with economies at a similar stage of development, however, China’s services sector is lagging behind. Both GDP and employment shares of the services sector are relatively small. Services trade also accounts for a relatively small share of China’s total trade. In particular, China’s new services are underdeveloped. As per capita income rises and resultant urbanization accelerates, the country’s services sector is expected to expand further and hence play a key role in rebalancing China’s economy away from its over-reliance on manufacturing and exporting. To reach this goal, further reforms and prudent government policies are needed. [ABSTRACT FROM PUBLISHER]