IMF urges China to open services sector to dial down trade friction with the US
China should open up its services sector to ease trade tensions with the US and bolster global trade, according to a senior official from the International Monetary Fund.
The medical, health, legal and financial services sectors are among areas that could be liberalised, Changyong Rhee, the Asia-Pacific director at the IMF, said in an interview at a gathering of finance and economy ministers in Washington. The strength of the US also lies in its tourism and entertainment services.
“China can gain a lot by opening its services sector” and having more trade with the US, said Rhee.
The comments come after President Donald Trump agreed with his Chinese counterpart Xi Jinping to a 100 day review on trade relations, and as the US Commerce Department studies how to address its trade deficits with foreign countries, including the US$347 billion gap with China last year.
During his election campaign Trump accused China of stealing American jobs and intellectual property. While he has since softened some of that criticism and pulled back from labeLling China a currency manipulator, his administration announced on Thursday an investigation of steel imports, a move that could trigger fresh tensions.
While China is the world’s biggest manufacturer and exporter, services are increasingly powering economic growth as part of a shift away from a reliance on heavy manufacturing and export-led growth toward services and consumer demand. Services now account for more than half of GDP.
China’s better-than-expected 6.9 per cent first-quarter economic growth suggests “upside risks” to the IMF’s current projection of 6.6 per cent expansion this year, said Rhee at a separate briefing in Washington.
Trade between the world’s two biggest economies supports around 2.6 million American jobs, according to the US-China Business Council. While the US has a goods-trade deficit with China, its exports of services to the country are growing rapidly. Between 2006 and 2014, they climbed more than 300 per cent.
Rhee said he is expecting a road map to emerge from the 100-day trade review process.
“I hope that this road map will be constructive, having a win-win not for just China and the US but for the global economy,” he said. “For high standards, high ambition, if we open up our markets, for more competition with each other this will be great for China’s development, re-balancing its development.”