From a manufacturing giant to a sophisticated services provider

Services are now included in five-year plans.
Recently the government established a policy to boost service imports and exports to US$1 trillion (Bt32.7 trillion) by 2020 and improve their proportion in total foreign trade.
There are many reasons for the realignment of the economy towards services.
One is that it will help redress the trade imbalance. While China frequently posts massive surpluses of international trade in goods, its service side has always run a deficit.
Meanwhile, labour costs are rising, the Chinese currency is on a long-term strengthening trend and traditional merchandise trade has been faltering amid the slowing global economy.
China needs to shift to a service-based model so that it can nurture new growth sources and achieve its goal of becoming a high income society.
It is making good progress, as already growth in the service sector is outstripping that of manufacturing.
In 2013, the contribution of services to GDP was 46 per cent compared to manufacturing’s 44 per cent.
In some major cities such as Shanghai, services dominate the local economy. Last year, the tertiary services sector accounted for 62.2 per cent of Shanghai’s GDP, compared with secondary industry – manufacturing and construction – which accounted for 37.2 per cent.
This momentum should continue to accelerate. More than half of foreign direct investment in China last year – 55 per cent – was in services, while FDI in manufacturing fell to less than 40 per cent of China’s total FDI.
One way to understand China’s economic direction is to note the seven strategic emerging industries it is targeting – energy efficiency and environmental technologies, next generation information and technology, biotechnology, high-end equipment manufacturing, new energy, new materials and new energy vehicles.
This clearly reflects China’s intention to focus on high value and innovative manufacturing and industrial development backed up by a sophisticated service economy.
On a practical level, I am often asked by Thai investors what kind of business should Thai entrepreneurs invest in in China?
Besides “engaging in the business that one knows best”, I usually mention the huge potential I see in services, such as restaurants, spas and hospitality, for Thai businesspeople.
As China moves towards its goal of becoming a post-industrial society, incomes will rise and more Chinese will visit Thailand.
As we can see already from the resurgence in Chinese tourism in the first quarter of the year – they definitely appreciate our services!