Services seen as a bright spot for the economy-Dahe.cn

Amid a sustained recovery in consumer spending, China has rolled out a series of policy measures to open up its services sector. The country aims to further boost consumption by improving the provision of more high-quality services, officials and experts said Friday.

By expanding dynamic openness in the services sector, where market demand is strong but high-quality supply is insufficient, the world’s second-largest economy is seeking to strengthen the positive domestic demand angle and boost economic growth, they added.

Their comments came after the National Bureau of Statistics released a better-than-expected consumer price index, a leading indicator of inflation, on Friday, signalling a rise in consumer confidence and demand as prices rose from a month earlier and year-on-year growth also picked up.

On a month-on-month basis, the CPI reversed a 0.2 percent decline in June and rose 0.5 percent in July, said Dong Lijuan, a statistician at the bureau, adding that the CPI rose 0.5 percent year-on-year, an acceleration of 0.3 percentage points from the previous month’s pace.

Looking to the second half of the year, with summer travel picking up, coupled with the typical increase in consumption in the fourth quarter, the consumer price index (CPI) is likely to maintain a “mild recovery”, the People’s Bank of China, the country’s central bank, said in a report on Friday.

To further strengthen the positive trend in consumer spending, special attention will be paid to strengthening the services sector, which is a key element in unlocking the hidden consumption potential, officials said.

Growth in services retail sales has consistently outpaced growth in goods sales since the government began publishing data in August last year, indicating a shift in consumer behaviour.

According to NBS data, in the first half of this year, retail sales of services grew by 7.5% year-on-year, outpacing the growth rate of retail sales of goods by a margin of 4.3 percentage points.

It is worth adding that the influx of international companies providing top-class services to the Chinese market should improve the supply of services and stimulate domestic demand.

To this end, the country will update its industry directory to include more sectors that encourage foreign investment, especially those related to service consumption, Tang Wenhong, deputy commerce minister, told a news conference.

In addition, the negative list of foreign investment will be shortened accordingly to enable the orderly expansion of openness in services such as telecommunications, education, culture and healthcare, Tang added.

Just a week ago, China’s top leaders, at a meeting of the Politburo of the Central Committee of the Communist Party of China, also pledged to give greater importance to policies to increase consumer spending, with a particular focus on the services sector.

The recovery in the consumer services sector, which includes domestic and international tourism, food services, restaurants and entertainment, has been solid, said Daniel Zipser, senior partner at global consulting firm McKinsey & Co.

According to official data, consumer spending on services accounted for 45.6 percent of total consumer spending in China.

However, in developed countries, services’ share of total consumer spending is typically around 70 percent, much higher than the current level seen in China, said Sun Xuegong, director general of the department of policy studies and consulting at the China Academy of Macroeconomic Research.

This disparity highlights the huge untapped growth potential for services consumption in China, Sun added.

Zhang Ming, deputy director of the Institute of Finance and Banking, part of the Chinese Academy of Social Sciences, said that with a projected scale of more than 1 trillion yuan ($139.46 billion), distributing consumer vouchers through methods such as increasing the deficit or issuing special treasury bonds has the potential to boost spending in various sectors.