Services bring cheer to trade amid tough times

More opening-up, stable recovery, digitalization lift hopes of home and global markets

Between 2012 and 2022, a period that included nearly three years of COVID-19 disruptions to various economic activities, China's trade in services notched up an outstanding record. It grew more than 6 percent annually on average — 3 percentage points more than the global growth rate — helping China to extend its position as the world's second-largest trader in services for nine consecutive years.

More than 200 countries and regions are involved in trade in services with China, which covers purchase and sale of services like transportation, communication, construction and related engineering, finance, entertainment, culture, sports, tourism, education and environment.

According to data from the Ministry of Commerce, China's trade in services last year was worth 5.98 trillion yuan ($872.81 billion), up nearly 13 percent year-on-year, bringing cheer to the overall trade sector that seemed to be weighed down by tardy trade in goods and slowing export growth.

Despite COVID-19, softening global goods trade and geoeconomic tensions, China's trade in services bloomed on the back of continuous opening-up, the stable recovery of the services sector and digitalization, experts said.

Segments like human capital-intensive services, knowledge-intensive services and travel services — education, tourism, aircraft and vessel maintenance, TV and film production, and so forth — have been particularly active.

Proof of this shines bright at Xiamen Gaoqi International Airport in East China's Fujian province. There, standing in front of two huge pieces of aircraft landing gear at a maintenance plant, Frenchman Christian Pinter, general manager of Taikoo (Xiamen) Landing Gear Services Co Ltd, and his local colleagues recently engaged in a passionate discussion with airport representatives on the expansion of their company's new workshop.

"Our current capacity allows for the completion of about 300 aircraft legs per year and we aim to increase that number to 365 later this year, or one leg a day on average through the year. However, we need additional space to reach this goal," said Pinter.

To address shortage of space in the current building and support its growth plans, the company may need to consider external storage options, he said.

Over the past several months, China's optimized COVID-19 response has generated more business not only for the company but also providers of aviation consumables, aircraft repair and engine maintenance, catering firms, and both cargo and passenger airlines.

For instance, Xiamen Customs, a local unit of China's General Administration of Customs, supervised 385 inbound and outbound maintenance flights in 2022, up nearly 14 percent on a yearly basis. The actual import and export value of aviation maintenance and processing trade had more than doubled last year. These businesses continued to grow at a high rate in the first two months of this year.

To support its anticipated workloads, Taikoo (Xiamen) will explore outsourcing some of its workshops and relocating some activities to other locations in Xiamen. This approach will create remote jobs rather than jobs within the airport.

In January alone this year, China's trade in services reached 459.5 billion yuan, with transport and travel propelling the sector, said the State Administration of Foreign Exchange.

In the 2012-21 period, the figure increased more than 70 percent to $821.2 billion, with its global share rising from 5.4 percent to 7.1 percent. For perspective, trade in goods climbed from 24.4 trillion yuan in 2012 to 39.1 trillion yuan in 2021, data from the General Administration of Customs showed.

Market watchers and business executives said China's influence in the services sector has been bolstered by factors like soaring growth in foreign creative and cultural trade and knowledge-intensive services. They are convinced China's trade in services will be a long-term thriving force that will shore up the country's economic growth.

They also noted that China's trade in services has emerged as a big hope in the global market, contributing to the ongoing global economic recovery, thanks to government policies that seek to make opening-up broader and deeper.

One potential driver of China's future economic growth could be the rising exports of human capital-intensive services, which require a higher level of expertise and skill. These services could include technology consulting, engineering, and research and development, said Zhang Wei, chief expert of the Shanghai-based China Association of Trade in Services.

He said rising demand for high-quality foreign services among the country's growing middle-income earners will be another factor to contribute to the national economy. These services could include education, tourism, healthcare and entertainment.

Echoing the sentiment, Zheng Wei, assistant researcher at the Shanghai-based China Service Outsourcing Research Center, said a distinct upside still exists in the growth of trade in services in China as its scope now extends to artificial intelligence, the metaverse and other such fields, with huge potential for high growth.

China's trade in knowledge-intensive services rose nearly 8 percent year-on-year to 2.51 trillion yuan in 2022, said the Ministry of Commerce. Travel services continued to recover last year as trade in this segment rose more than 8 percent year-on-year to nearly 856 billion yuan.

Phillipa Harrison, managing director of Tourism Australia, a government agency responsible for attracting international visitors, said with the easing of COVID-19 measures for international travel to and from China, the agency remains optimistic about the outlook for the industry this year and beyond.

"We believe the industry will recover in an orderly manner," she said, adding that early indications suggest there is strong interest in visiting Australia among Chinese travelers and a steady return of visitors is expected in the weeks and months ahead.

During her trip to China in early March, Tourism Australia signed agreements with Chinese airlines, including Air China Ltd and China Eastern Airlines Corp Ltd, to boost recovery of travel between China and Australia.

China was Australia's largest source market for both international visitation and spending in 2019.Some 1.44 million Chinese residents traveled to Australia, making up 15 percent of all international arrivals in the country. In all, they spent around A$12.4 billion ($8.3 billion).

By offering more market access to global service providers, China will be able to offer consumers a wider range of options and improve the overall quality of services available, said Lin Meng, director of the Modern Supply Chain Research Institute, which is part of the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

"As the educational level of young workforce continues to rise across China, the country's role in the global industrial chain is shifting from being a 'world factory' to a 'world office'," she said. This transformation, she said, could help businesses in fields like software design and modern logistics to create more jobs in China in the coming years.

Wu Dongming, CEO of DHL Express China, a German courier service provider, said the company will continue to invest on its logistics infrastructure in China and launch intercontinental cargo routes between major Chinese cities and other key global locations this year.

After putting its latest China gateway into operation in Wuxi, Jiangsu province, in January, DHL began expanding its Shenzhen gateway in Guangdong province. The primary objective of these projects is to offer local businesses quicker transit times and simplified access to global markets.

To boost its economy, China will further its efforts to attract and utilize more foreign investment this year, as outlined in this year's Government Work Report.

The report recommended several measures to achieve this goal, including expanding market access, opening up the modern services sector, ensuring national treatment and improving services for foreign-funded companies, and facilitating the launch of landmark foreign-funded projects.

To square up against domestic and foreign rivals, Cainiao Network, the logistics arm of Chinese e-commerce giant Alibaba Group Holding Ltd, has increased its overseas distribution centers to 15, with focus on last-mile deliveries and smart lockers.

Liu Xinyang, general manager of Cainiao Export Logistics, underlined the need to streamline and digitalize logistics capabilities and services as well as cross-border supply chains.

He said the COVID-19 pandemic has highlighted the importance of stable and efficient cross-border logistics as more merchants shift online to tap a wider overseas consumer base.

To date, Cainiao has set up six smart logistics hubs around the world. It operates more than 3 million square meters of cross-border logistics warehouses, and has over 240 chartered flights for long-distance logistics each month.

All in all, the rise of trade in services is part of a larger trend, which is the increasing significance of services relative to manufacturing and agriculture. Services' added value in 2022 rose 2.3 percent year-on-year to 63.9 trillion yuan, accounting for nearly 53 percent of China's GDP, 12.9 percentage points higher than that of manufacturing. Services contributed nearly 42 percent to national economic growth last year, driving GDP growth up by 1.3 percentage points, according to the National Bureau of Statistics.