'Larger scale' foreign investment likely as urbanization accelerates

China's top economic planning body said on Friday the service sector will become more appealing to foreign investors, driven by an expected surge in business from the country's accelerated urbanization process.

Xia Nong, deputy director-general of the Department of Industry under the National Development and Reform Commission, said the country will adopt more "proactive strategies" to further open its service sector on a "larger scale" to international competition.

Foreign investment will be integrated with boosting China's industrial restructuring, and the country's top service providers will also be encouraged to go overseas, Xia told a press briefing on Friday.

Foreign direct investment into most of China's services sector surged in 2012, just as foreign investment into real estate fell, dampened by a series of regulatory policies aimed at controlling rising prices.

Overseas company investment in urban transportation surged a massive 24-fold in the first 11 months from a year ago, followed by telecommunications and other information services, which soared nearly 12-fold, and pipeline transportation industries, at sevenfold, according to latest Ministry of Commerce figures.

Foreign investment in the service sector was valued at $47.57 billion in the first 11 months of 2012, down 2.5 percent year-on-year, but except for the 8.3 percent decline in real estate investment, the rest of the sector enjoyed a 2.8 percent rise from a year ago.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated to the Ministry of Commerce, said foreign investment in the service sector had now surpassed that into the manufacturing industry, which saw a 7.1 percent drop in the first 11 months.

"China's top leaders have highlighted the importance of urbanization, and the growth in the service sector reflects that, with foreign investors realizing the potential," said Huo, adding, however, that many investors were still unclear about future financing, tax and land policies.

Xia Nong said on Friday that specific policies were still being finalized, but insisted China will improve the service industry business environment.

"Expanding domestic demand will be a major stimulus for China's economic growth, and the greatest potential will come from the service sector."

He said that for the first time in the country's history, jobs provided by the service sector exceeded those in the agricultural industry in 2011, with new job growth in the sector increasing by 1.1 percent in 2011, to 35.7 percent of the country's total.

China's service sector generated 43.2 percent of China's GDP and employed about 34.6 percent of the workforce in 2010, which is still much lower than that of countries such as the United States and Japan, according to official figures.

China has set goals to raise those two figures by 4 percentage points respectively by 2015, from 2010 levels, according to a plan for the development of the service sector.

The plan, adopted by the State Council in September, was the first Five-Year Plan (2011-2015) for the sector.

It stresses services closely related to the restructuring of some industries in particular, including finance, transportation, logistics, high-tech, design consulting, business services, e-commerce, engineering consulting, professional services and energy conservation.

Industries to meet people's diversified demands were also listed in the plan, including the cultural industry, tourism, health and social assistance, legal services, and household services.

lanlan@chinadaily.com.cn

(China Daily 12/29/2012 page9)