Trade in services experiencing exponential growth

Visitors check out a colored lantern at the Sichuan province exhibition stand during the 2024 China International Fair for Trade in Services in Beijing on Sept 12. ZHANG WEI/CHINA DAILY

For Koh Poh-Yian, senior vice-president of FedEx Express and president of FedEx China, 2024 is undoubtedly shaping up to be a busy year.

The United States-based logistics service provider launched two new flights to the US from Qingdao, Shandong province, and Xiamen, Fujian province, in June, and expanded its fast cross-border shipping services for parcels heading to the US and Europe from China in July.

"This year also marks the 40th anniversary of our operations in China," said Koh. "Since 1984, FedEx has been committed to expanding its logistics network and service portfolio to support the growth of China's supply chain and trade in services."

In contrast to goods trade, trade in services refers to the sales and delivery of intangible services like transportation, tourism, telecommunications, advertising, education, computing and accounting.

With multinational corporations such as FedEx, Denmark's Maersk Line and France's CMA CGM Group all expanding their logistics capabilities in China this year, their expansion is reflective of a broader trend in China's trade in services, a sector that has experienced exponential growth.

In 1982, during the early stages of reform and opening-up, China's services trade had a total value of just over $4 billion. By 2023, this figure had jumped to $933.1 billion, a 233-fold increase, data from the Ministry of Commerce show.

As global value chains undergo restructuring, market watchers said that both Chinese and foreign companies are positioning themselves to capitalize on growing demand for services such as innovation, finance, logistics, marketing and branding.

Wang Xiaohong, a researcher at the China Center for International Economic Exchanges in Beijing, said China's continued efforts to expand its opening-up will position trade in services as a key engine for sustaining economic growth and cultivating new competitive advantages in the coming years.

China's dedication to enhancing the quality of its manufacturing sector is anticipated to boost demand for services in areas such as innovation, equipment maintenance, technical expertise, information, professional support and design, said Wang.

This will stimulate the development of new business models, industries and operational approaches, both domestically and globally, she added.

Shenyang North Aircraft Maintenance Co Ltd, a subsidiary of State-owned China Southern Airlines, is a typical example of a company benefiting from China's service trade growth, leveraging its expertise in auxiliary power unit maintenance to tap into new markets.

The Shenyang, Liaoning province-based aircraft parts maintenance and overhaul service provider saw its sales revenue from aircraft APU maintenance surge 15.9 percent year-on-year to 438 million yuan ($62.06 million) in the first eight months, marking five consecutive years of rapid growth, said Shenyang Customs.

"With a capacity to repair 245 APU units annually, we are able to provide services for six types of APUs, including those for Airbus A320 series aircraft and Boeing 737NG planes," said Wang Lulu, a senior engineer at Shenyang North Aircraft Maintenance. "Since 2022, we have serviced 36 APUs from countries and regions including Europe, the US and Southeast Asia, generating sales revenue of 123 million yuan. Our overseas maintenance services have emerged as a new growth driver for the company."

The value of China's trade in services grew by 10 percent year-on-year to 6.57 trillion yuan in 2023, said the Ministry of Commerce.

This momentum has continued in the first seven months, with China's total value of services trade growing 14.7 percent on a yearly basis to 4.23 trillion yuan.

To further open up its services sector and facilitate convenient cross-border flow of various innovation elements, the State Council, China's Cabinet, released a policy document in early September regarding promotion of the development of trade in services through high-standard opening-up. They are crucial to supporting the expansion of companies like FedEx and Shenyang North Aircraft Maintenance.

The guideline addressed key points in supporting the development of trade in services and is expected to encourage an innovative environment for the growth of the sector.

Since joining the World Trade Organization in 2001, China has been fulfilling its commitments, accelerating the opening-up of its services sector to the outside world, and successfully boosting trade in services, said Tang Wenhong, assistant minister of commerce.

Tang said that the government will fully implement the negative list for cross-border services trade, establish and improve the management system for the list, and strengthen links between various administrative approvals, licenses, filings and negative list adjustments.

A negative list refers to specific areas of industry where foreign investors are not allowed to operate. They can operate in areas not appearing on the list.

"Since China's manufacturing investment and goods trade have remained at a high level, trade in services plays an even more important role to drive high-quality economic growth and new quality productive forces," said Jiang Hao, a partner at global management consultancy Roland Berger.

New quality productive forces are advanced productivity freed from traditional economic growth modes and productivity development paths, featuring high-tech, high efficiency and high quality, and are in line with the new development philosophy.

Jiang noted that the top three categories of China's trade in services are tourism, transportation and other business services. They account for 60 percent of the nation's total services trade, while most developed countries' trade in services focuses on knowledge and technology-based areas.

"This means China has a lot of potential to expand services trade, particularly as more Chinese companies are going overseas and seeking high-end services to go along with them," he said, adding that as China continues promoting the Belt and Road Initiative and contributing to the growth of the Global South, services trade will be even more critical to help domestic firms achieve their goals.

Similar views were expressed by Mohammed al Ajlan, deputy chairman of Ajlan & Bros Group, a Saudi Arabia-based conglomerate. "Since entering the Chinese market, we have witnessed tremendous change and maintain long-term confidence in China's high-quality economic development and increasing openness, especially in the areas of trade in services and technology growth," he said.

With closer China-Saudi political and business ties, the deep integration of the BRI and Saudi Arabia's Vision 2030 program between Saudi and Chinese companies will deepen and solidify, said al Ajlan.

"We aim to facilitate the implementation of advanced concepts, technologies, products and services in Saudi Arabia through platforms such as the China International Fair for Trade in Services," he said. Al Ajlan is also chairman of the Saudi-Chinese Business Council.

China and Belarus also signed a trade agreement in services and investment in August, said the Ministry of Commerce. The agreement is poised to further unlock the potential for cooperation in these fields and support high-quality development of the BRI.

Attracted by China's high-level opening-up, culture and quality education service, Duke Kunshan University, a joint venture of Duke University in the US, Wuhan University in Hubei province and Kunshan, a city in Jiangsu province, witnessed its largest undergraduate class this year, up 25 percent from the previous year and doubling the size of its inaugural undergraduate class in 2018.

About 350 students are from China, with about 150 being international — a 50 percent increase over the previous year, doubling the size of its inaugural undergraduate class in 2018.

This year, the university received the highest number of international applications, with over 4,700 applicants from 123 countries competing for 150 spots. About half of these applicants were from the US, according to John Quelch, executive vice-chancellor of Duke Kunshan University.

"I believe that DKU will help me achieve my goals by not only immersing myself in Chinese culture, but also broadening my perspective through other students, faculty and courses," said Sara Salazar, a class of 2028 student from Texas, the US.

From 2013 to 2023, the average annual growth rate of global services exports reached 4.9 percent, which doubled the average growth rate for the world's goods exports, said the World Trade Organization.