Trade in Services: The New Engine of Global Prosperity

On September 4, 2020, the China International Fair for Trade in Services (CIFTIS) opened in Beijing. Since 2012, CIFTIS has been held six times and has grown into a comprehensive, state-level large-scale exhibition and trading platform to promote global trade in services. Influenced by the COVID-19 pandemic and trade protectionism, this year's CIFTIS is being held in the midst of sluggish trade and economic prospects, and the theme of this year’s CIFTIS is “Global Services, Shared Prosperity.” In his speech delivered by video at the Global Trade in Services Summit, Chinese President Xi Jinping called on countries around the world to work together to foster an open and inclusive environment for cooperation, unleash the power of innovation in driving cooperation forward and promote mutually beneficial cooperation.

The service sector is the new engine of economic growth. In 2019, the global cross-border transaction volume in services trade exceeded US$6 trillion, accounting for about one quarter of global trade total. The proportion of emerging services export continues to increase to 51.2 percent in 2019. China’s total volume of trade in services exceeded US$600 billion in 2014, ranking second in the world for the first time. As COVID-19 sweeps across the world, the e-commerce industry in China has explored some new models such as contactless distribution, unmanned retail stores, and livestreaming sales, which have played an important role in ensuring supply, supporting resumption of work and production, and stimulating consumer replenishment. According to China’s National Bureau of Statistics, online retail sales in the first half of 2020 surpassed 5.5 trillion yuan (US$803 billion), an increase of 7.3 percent year-on-year. From 2012 to 2019, the amount of foreign investment in China’s service sector increased from US$60.27 billion to US$100.13 billion, with its proportion in total foreign investment increasing from 53.9 percent to 72.5 percent.

Trade in services promotes digital globalization, and its status in global trade has been constantly enhanced. The amount of trade in services has been growing faster than trade in goods. The average annual growth rate of trade in services during 2012 to 2019 was 4 percent, comparing with 0.36 percent of trade in goods. There are three prominent trends of global trade in services, including the continuous rising proportion of knowledge-intensive trade in services, emerging markets and developing countries with huge potential in developing trade in services and digital technology to innovate the supply mode for trade in services. From 2012 to 2019, the proportion of cross-border trade in services in China’s foreign trade increased from 11.7 percent to 15.2 percent and the share of China’s export of knowledge-intensive services increased from 36.7 percent to 51 percent.

Holding CIFTIS signifies China’s will to continue firmly implementing the opening-up policy. CIFTIS is the first major international trade event held offline by China since the outbreak of the COVID-19 pandemic. President Xi Jinping called for an open and inclusive business environment and reaffirmed that China will continue to open up. The holding of this fair, together with a series of measures to further opening up such as reducing tariffs, expanding imports, issuing China’s 2020 new negative lists, and building the Hainan Free Trade Port, shows that China will continue to adhere to economic openness and support international economic and trade cooperation.

CIFTIS provides a new platform to boost trade in services. This year’s event attracts more than 18,000 companies from nearly 150 countries, including more than 2,000 exhibitors manning real booths, and it is expected to welcome more than 100,000 visitors. With trade in services playing an increasingly prominent role in global trade, this fair will not only facilitate communication and exchanges of government officials and trade in services experts from around the world, but also help more Chinese companies participate in trade in services. At the same time, China needs to expand its opening up in the trade in services field because the country has been maintaining a large deficit in this area. According to statistics from the Ministry of Commerce, in 2019, China had a trade surplus of US$420 billion in goods, but incurred a trade deficit of US$260 billion in services. Further opening up in service areas such as finance, communication and education will promote a more comprehensive development of China's future trade in services, support high-quality development of China’s trade and economic development, and thus contribute to global prosperity.

The authors are both researchers with the Institute of World Economics and Politics, Chinese Academy of Social Sciences.