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Opinions
Special> 60 Years of China-Pakistan Diplomatic Ties> Opinions
UPDATED: May 25, 2011 NO. 21 MAY 26, 2011
Bright Prospect
China and Pakistan aim to boost trade in the service sector
By SARDAR AMINULLAH KHAN
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RESPONSIBLE ASSISTANCE: Lu Kejian, Director General of Department of Asian Affairs, Chinese Ministry of Commerce (fourth left), conducts an on-spot investigation in northwest Pakistan on November 3, 2010, in preparation for China's assistance program after Pakistan was hit by heavy flood in the summer (TIAN BAOJIAN)

The rise of China's service sector is a boon for emerging Asian economies. This could contribute to a sustained growth in Pakistan's service sector, and also help with Asia's infrastructure building, which is necessary for the promotion of trade and investment in the region.

Significance

In China, the service sector contribution to exports has been considerable, with a turnover of $286 billion in 2009, rising from $157 billion in 2001. In 2010, this number crossed the $300 billion mark. This is due to the huge investment that the country has made in the sector to match the development needs and to adjust the economic structure.

China was initially a closed and centrally planned economy. It opened its service sector when it joined the WTO in 2001. Now China is benefiting from the huge potential of this sector for domestic development. Specifically, it is benefiting from the opening of some sectors including finance, manufacturing, tourism, information and communications technology, logistics, transport and distribution.

China is the world's fifth largest exporter, following the United States, Britain, Germany and France. The service sector contributes around 40 percent to GDP and provides a sizeable number of jobs. Consequently, the increased share of the sector in exports has reduced China's trade deficit.

In addition to substantial trade, the sector has embraced a FDI of around $48 billion in 2010 out of the total FDI of $106 billion, an increase of 28.6 percent. The specific industries include logistics, finance, transportation and communication, travel and tourism, information technology, culture and recreation and medical.

The role of the sector has increased due to the rising demand of technological improvements, increases in people's incomes and infrastructure development. The Chinese Government attaches great importance to the development of the sector, as global trade in the area rose to $3.8 trillion in 2008 from $365 billion in 1980. Being a exporter is obviously beneficial.

China is the world's largest trading country. This makes it the most important maritime state in the number of its merchant vessels and in the contribution to the world's total shipping. Main Chinese ports grew tremendously and are listed among the world's top 20 terminals, displacing such ports as Kobe and Yokohama.

Due to the ever-growing inter-regional trade, containerized trade between China and Southeast Asian countries is surging. In addition, Pakistan, Sri Lanka and Saudi Arabia aimed at exports from China. These factors provide ample investment opportunities for China's ultimate growth of trade.

As the world largest exporter and second largest economy, China needs an outstanding sector to support the development initiatives. The policy initiatives by the government and response to the global economic community also affected the performance of the sector in China.

Growth of logistics, finance, transportation (especially railways), and R&D related to energy and new materials has involved huge investment. And the returns are huge as shown by development of new industries, better service provisions and increases in trade in the sectors falling in the ambit of the sector in recent years.

In view of the increased contribution of the sector to the GDP across the world, its development is on high agenda of the governments. Almost all of China's neighboring countries are taking some measures to boost border trade. Some are establishing border trade zones and transforming their border trade with China into normal trade.

Many countries have signed FTA as well as GATS with China. Under the latter, Pakistan will further open 102 sub-sectors in 11 major service sectors among all 160 sub-sectors in 12 major service sectors to Chinese service suppliers. These suppliers range from the fields of construction, telecom, finance, distribution, environment, medical service, tourism, transportation, R&D, computer education to entertainment, culture and sport.

China will further open 20 sub-sectors in six major service sectors of all 160 sub-sectors in12 major service sectors to Pakistan service suppliers in mineral mining, R&D, environment, hospital, tourism, sport, transportation, translation and real estate.

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