In 2016, the service industry had brilliant performance, took the lead among three industries and made more and more contribution to national economic growth, becoming a stabilizer and booster for economic development and playing an important role in “stabilization for growth, stabilization for better.”

I. The key position of service industry further consolidated

As the first industry in national economy, service industry’s contribution to the growth of national economy is further improved and plays a more impressive role as a leading force. In 2016, the added value of service industry was 38.4221trillion yuan, up 7.8% than that in the previous year, taking the lead among three industries, 1.7 percentage points higher than that of the 2^nd industry. Service industry’s proportion in GDP rose to 51.6%, 1.4 percentage points higher that in the previous year, and 11.8 percentage points higher than that of the 2^nd industry. Service industry’s contribution to the growth of national economy was 58.2%, 5.3 percentage points higher that in the previous year, and 20.8 percentage points higher than that of the 2^nd industry.

Service industry became the field with the most investment. In 2016, despite of the slowdown of investment growth in general, service industry kept a two-digit investment growth and completed fixed assets investment of 34.5837 trillion yuan, up 10.9% year on year, 7.4 percentage points higher than that of the 2^nd industry, and accounting for 58% of all fixed assets investment, up 1.4% year on year, 19.1 percentage points higher than that of the 2^nd industry, and its newly-added investment accounted for 76% of the national total. The thriving of service industry attracted the boom of foreign investment. In 2016, service industry applied foreign investment of 571.58 billion yuan, up 8.3% year on year, accounting for 70.3% of the total applied foreign investment. The year-on-year foreign investment application increase was 59.8% in IT, 112.8% in consulting service, 66.4% in computer application service, 42.9% in comprehensive technical service, and 83.1% in distribution and retailing sector. In addition, as an important field for attracting foreign investment, high-tech service industry saw 86.1% growth in foreign investment application.

Service industry contributed most to the tax revenue. With the comprehensive implementation of “Business Tax to VAT Reform”, service industry’s tax contribution rose steadily and rapidly. In 2016, the national tax revenue (excluding duties, vessel tonnage tax, export tax rebate not deducted, ibid hereafter) increased 3.3% year on year. The 2^nd industry’s tax contribution decreased while service industry increased 6.6%, 3.3 percentage points higher than that of overall growth and 7.3 percentage points higher than that of the 2^nd industry. Service industry’s tax contribution accounted for 56.5% of the total tax revenue, 13.2 percentage points higher than that of the 2^nd industry. The newly-added value of service industry’s tax revenue was higher than the total newly-added tax revenue, or 109.5% of the total newly-added tax revenue.

II. The scale of service industry continuously expanded

Service industry has the big share in new market entities. In the first three quarters of 2016, the service industry had 3.252 million new enterprises, up 27.6% year on year, accounting for 81.1% of total new enterprises registered, 13.9 percentage points higher than the growth of total new enterprises registered. The number of new enterprises registered in the sectors of education, culture, sports and entertainment, science research and technical service, information transmission, software and IT service grew fast, infusing new vitality for the development of new economy.

From January to November of 2016, the turnover of service enterprises above statistics threshold increased 11.4% year on year, 4 percentage points higher than the growth rate in the period of the previous year. Four industries saw rapid year-on-year growths, 17.5% growth in household, repairing and other services, 16.6% in property (excluding real estate development and operation), 16.1% in information transmission, software and IT service, and 15.4% in leasing and commercial service, which collectively contributed to 7.8 percentage points growth of service enterprises above statistics threshold.

Key service enterprises had good performance with rapid growth in turnover. From January to November of 2016, the turnover had year-on-year increase of 15.5% in strategic emerging service sector, 15.5% in cultural and related sectors, 11.9% in sci-tech service industry, 4.1, 4.1 and 0.5 percentage point higher than the overall growth of service enterprises above statistics threshold.

Service trade scale continuously expanded. From January to November of 2016, China’s service imports and exports totaled 4.7948 trillion yuan, up 14.1% year on year, accounting 18.1% of total foreign trade, 3.7 percentage points higher than that in 2015. Industries with high added value saw rapid growth. Exports of maintenance and repair service rose 52%, of advertising service grew 60% and of financial service increased 50% year on year.

III. The new momentum of service industry rapidly grows

(I) Internet economy drives prosperous development of new economy

With the development in recent years, Internet economy has become the characteristics of China’s economic development. In 2015, the 5^th plenary session of the 18^th CPC National Congress upgraded “building a cyber-based power” to a national strategy, further highlighting the function and position of Internet economy in the development of national economy. In 2016, Internet-related industries continued the rapid growth and led the prosperous development of new economic industries and sectors. From January to November of 2016, Internet and related service had a turnover growth of 40.0%, 13.6 percentage points higher than that in the same period of 2015, accounting for 3.5% of the total turnover of service enterprises above statistics threshold, 0.9 percentage points higher than that in the same period of 2015, and had a profit growth of 45.5%, much higher than the average profit growth of service enterprises above statistics threshold. With the steady progress of the “broadband China” strategy, mobile internet continued the explosive growth. From January to November of 2016, the traffics access of mobile Internet accumulated to 8.21billion G, up 124.1% year on year.

The rapid growth of Internet and IT technology continuously incubated new industries, new businesses and new modes, and drove the linkage and transfer between humans and humans, between humans and things and between humans and information. Especially, the rapid growth of mobile Internet greatly influenced people’s production and living modes, and boosted the rapid development of new services and industrial innovation. In 2016, sharing economy further thrived and penetrated to traffic, household service, logistics and other production and living-related fields. For instance, logistics platforms with huochebang.cn as a representative realized the sharing of freight vehicles, improved logistics efficiency and boosted the saving of traffic resources. The platforms of mobike, ofo and didi facilitated the trips of everyone. The self-media fd, zhihu and other WeChat public accounts provided new channels for cashing and sharing knowledge.

(II) E-commerce development continuously accelerated

E-commerce and postal express delivery developed rapidly. In 2016, online retailing of real goods increased 25.6% year on year, 15.2 percentage points higher than the growth of the Total Retail Sales of Consumer Goods, accounting for 12.6% of the Total Retail Sales of Consumer Goods, 1.8 percentage points higher than that in the previous year. The national E-commerce turnover reached 26.1 trillion yuan, up 19.8% year-on-year. The booming of E-commerce triggered the thriving of postal service. In 2016, China’s postal service revenue increased 33.2% year on year, 7.1 percentage points higher than that in the previous year. The national postal service volume increased 45.7%, 8.3 percentage points higher than that in the previous year. Express delivery made outstanding contribution to postal services. The revenue of express delivery increased 43.5% year on year, 10.3 percentage points higher than the growth of the national postal service volume. The revenue of newly-added business in express delivery accounted for 89.9% of that in the national postal service.

Rural E-commerce is a great highlight. In 2016, the State Council continued the comprehensive demonstration of E-commerce’s access to rural regions, drove enterprises to enter rural E-commerce market at a faster speed. JD and Suning has set up county-level service centers and direct stores in more than 1000 counties. The yzg.ule.com system of China Post has covered more than 200,000 rural postal service outlets. Cainiao made efforts in boosting rural logistics development. The development of rural E-commerce not only contributed to poverty-relief, but also attracted numerous rural youth, college graduates and rural farmers back for startup and innovation. The State Council continues increasing support and will intensify the public service capacity of rural E-commerce and boost the economic transformation and upgrading of rural economy.

(III) Five major happiness industries develop quickly

With the upgrading of people’s consumption structure, in 2016, the five major happiness industries, namely tourism, culture, sports, health and elder-care services developed quickly, continuously boosted livelihood improvement and improved the peoples’ sense of happiness. From January to November, the turnover of the five sectors increased 12.6% year on year, 1.2 percentage points higher than the overall growth of service enterprises above statistics threshold. The five sectors saw rapid year-on-year growths, 8.1% growth in tourism service, 15.5% in culture and related services, 24.4% in sports service, 16.4% in health service, and 17.1% in elder-care service.

As the leading force of the five happiness industries, tourism showcased an outstanding function in the national socioeconomic development. In 2016, China’s tourism total revenue is expected to grow 13.6%, 2.6 percentage points higher than that in the previous year. According to the calculation of UNWTO(World Tourism Organization), in 2016, China’s tourism contribution to the national economy was 11%, to the employment was beyond 10.3% in addition to its outstanding comprehensive effects. The booming of tourism improved the industry’s attraction to funds. In 2016, the national direct investment to tourism hit 1.2997 trillion yuan, up 29.1% year on year, 21 percentage points higher than the growth of national fixed assets investment. Private investment to tourism was robust, accounting for 59% of the total tourism investment.

Highlights were also found in culture and related services, sports service, health service, and elder-care service. From January to November of 2016, the year-on-year turnover growth of cultural creation and performance was 21.6%, of recreation parks was 44.4% in culture and related services, of sports service was 50.5% thanks to the extensive roll-out of mass fitness and sports, health service, of medical research and experimental development was 28.9%, of health care service was 21.8% in health industry, and of the elder- and disabled-care service was 22.7% in the elder-care service sector.

In the future, China still has an enormous potential and space in its service industry. With the continuous increase of incentive policies, the acceleration of citizen’s consumption structure upgrading, the further progress of urbanization and rural modernization and the constant release of population and reform dividends, the leading function and influence of service industry in national economy will be further intensified. Its role as a “stabilizer” and “booster” in national economic development will be more obvious. The service industry will play a critical role in deepening the supplier-side structural reform and realizing the goals proposed in the 13^th Five-year Plan.

 

Source: Translated from Invest Guangzhou, Jan. 22, 2017