Urbanisation to boost industry development

The development of China's service industry continues to make huge strides, but it still has a long road ahead of it before it catches up to developed countries, according to government officials and industry experts.

'The service sector plays a central and critical role to China's future development. The service sector is a prime contributor today to China's gross domestic product,' said David Cunningham, Federal Express president for Asia-Pacific.

By 2005, China's service industry was expected to account for 36 per cent of China's GDP, Li Tiejun, deputy secretary general of the State Development Planning Commission, said at the World Services Congress luncheon yesterday.

The industry now accounts for 33.2 per cent of China's nearly nine trillion yuan (about HK$8.43 trillion) GDP, more than double its contribution to the 1978 GDP.

'This percentage is lower than the world's average level. This means that China's service industry has a lot of potential for development,' Mr Li said.

By comparison, Hong Kong's service industry accounts for 84.7 per cent of the territory's GDP.

The finance, insurance and real estate sectors make up 25.6 per cent of GDP while retail, import-export trade, restaurant and hotels account for 24 per cent.

However, the main barrier to developing China's service industry was a lack of urbanisation, Mr Li said.

'The mainland needs to build some cities as developed as Hong Kong. Developed cities have developed service industries,' he said.

After China becomes a member of the World Trade Organisation, many sectors in the service industry will be opened more to foreign companies vying for the country's fabled 1.3 billion consumers.

China's consumer goods retail volume rose 10.1 per cent between January and last month, said Huang Hai, director general of the State Economic and Trade Commission's department of trade and market.

He expects China's consumer goods retail volume growth to stay at about 10 per cent for the entire year.

As part of WTO stipulations China has agreed to phase out restrictions on a broad range of services, including banking, insurance and telecommunications in the next few years.

The domestic service industry should benefit from the government's urbanisation and 'Go West' policies to develop the information technology, tourism, real estate, transportation and financial sectors.

By 2005, China will have 520 million telephone users or a penetration rate of 40 per cent, said Mr Li.

Today, China has 120 million telephone users.

China will continue investing in infrastructure and will build 200,000 kilometres of new roads, 10,000 km of which will be highways, by 2005.

It will build 7,000 km of new railroad lines by 2005, bringing the total to 75,000 km.

More than 150 new deep water ports will be added along the coast by 2005.

China is also expected to have 150 airports in operation by 2005.