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Chinese Economy Steadies on Booming Service Sector
NBS data shows that the service sector has taken up a bigger share of the GDP than the manufacturing industry in 60 percent of provincial-level regions
 NO. 26 JUNE 29, 2017
People look at a drone for package delivery at the booth of China's e-commerce giant at the 2017 Beijing International Fair For Trade In Services on May 28 (XINHUA)

China's economic growth held steady in the first five months as key service indicators rose rapidly, suggesting that structural upgrades have cushioned long-term downward pressure.

"Led by supply-side structural reform and innovation-driven strategy, the national economy continued to grow steadily in May," said Liu Aihua, spokeswoman of the National Bureau of Statistics (NBS) on June 14. "Backed by structural upgrades, we are confident of continued growth in the future."

The NBS reported 8.1-percent growth for the service sector in May, flat with April and extending the rally since the beginning of the year. The data confirmed that the ongoing growth model transition was providing new impetus to the world's second largest economy.

NBS data shows that the service sector has taken up a bigger share of the GDP than the manufacturing industry in 60 percent of provincial-level regions.

One of the latest provinces to join the trend was Shandong in east China. In the first quarter, the service sector accounted for 51.1 percent of the province's GDP, up 1.5 percentage points from the same period last year, according to the provincial government.

Seven of the ten provinces with the highest GDPs have seen such a shift.

"The shift shows the Chinese economy is becoming dominated by the service sector. Under downward pressure, industrial upgrades are vital for sustaining economic growth and avoiding the middle income trap," said Chi Fulin, head of the China Institute for Reform and Development.

More profound changes are happening in relatively developed regions.

In the eastern metropolis of Shanghai, the proportion of the service sector in the GDP reached 50.8 percent in 2004. Last year, the city's GDP grew 6.8 percent, exceeding the national growth rate for the first time in eight years, with the service sector contributing over 70 percent.

"The change is a milestone in the Chinese economy. It showed that Shanghai got over the investment-driven growth model which China had relied on for years," said Li Yang, Director of the National Institution for Finance and Development under the Chinese Academy of Social Sciences (CASS).

Compared to developed countries such as the United States, however, the service sector's contribution to GDP in China remains low. But the sector has huge growth potential as it becomes increasingly attractive to investment.

Investment in the service industry jumped 11.6 percent year on year in the first five months, 3 percentage points higher than the overall investment growth.

Investment in the service sector rose 10.9 percent year on year in 2016, outpacing the 3.5-percent increase in the manufacturing industry, according to official data.

A CASS research report forecast the service sector will account for 72 percent of China's GDP and provide 56 percent of the country's jobs in 2030.

Other highly watched economic figures released on June 14, including retail sales, fixed assets investment and housing sales, also supported the strengthening of the economy.

Boosted by strong online sales, retail sales grew 10.7 percent year on year in May, signaling continued consumption strength.

Growth of property development investment slowed for the first time since last November as the market showed signs of cooling after the government's increasingly stringent measures to quash potential asset bubbles.

On June 14, the International Monetary Fund raised its forecast for China's economic growth this year to 6.7 percent, marking an increase from its already-raised April forecast of 6.6 percent.

This is an edited excerpt of a commentary published by Xinhua News Agency

Copyedited by Dominic James Madar

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