China may develop service economy in 5 years

17:11, October 09, 2010      

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China's service sector accounted for a 42.6 percent share of China's GDP in the first half of this year, representing a 1.3 percent increase. The growth is expected to continue, and it will surpass the industry sector share by 2015, the last year of China’s 12th Five-Year Plan.

Data from the Chinese Academy of Sciences showed that share of the service sector in GDP is expected to reach up to 48 percent by 2015 when a service economy is coming.

However, compared to the development of the advanced service industry in the world, China's domestic service sector has still stagnated, reflecting relatively backwards conditions. It remained at about 40 percent share in GDP in recent years, while services sector shares accounted for more than 70 percent and 60 percent of GDP in developed countries and the world average level, respectively.

On the other hand, China's service industry maintained a favorable momentum of growth and still has much room for development. Documents from the State Council suggest that by 2020, added value in the service industry is expected to account for more than 50 percent of GDP, and great importance will be attached to the development of modern services, such as financial and information services.

In this year’s work report of China’s State Council, service sector indicators increased significantly. The long-term strategy of the government continues to be geared toward expanding domestic demand and promoting economic growth.

At the same time, the importance of the service sector has become increasingly prominent under expanding consumption measures of the state aimed at increasing labor income and employment.

The service industry needs appropriate development plans to implement industrial guidance policies and take efforts to promote reform and innovation, said Xu Lin, financial secretary of the National Development and Reform Commission.

Xu also said that China is planning to carry out a series of tax reforms, including optimizing the value-added tax (VAT) and business tax as well as expanding the scope of VAT collection. These reforms will lower the tax burden on the service sector, which has seen higher taxes than the industrial sector, and promote its development.

By Li Mu, People's Daily Online


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