Since the founding of New China 70 years ago, China’s service industry has been growing in scale, its comprehensive strength has been continuously enhanced, its quality and efficiency have been greatly improved, and new industries and formats have emerged one after another, gradually becoming the largest industry in the national economy, which has become an important foundation for the stable economic growth of China.
As the main source of tax revenue growth, the main field of attracting investment, the main force of new enterprises and the main channel of absorbing employment, the service industry has reached 52.2% in GDP in 2018, becoming a "stabilizer" and "booster" for national economic development.
The service industry supports "half of the country"
In the early days of the founding of New China, China’s agricultural foundation was weak, industrial quality was not high, and service development was lagging behind. In the whole industrial composition, agricultural residents are dominant. In 1952, the added value of the primary industry accounted for 51.0% of GDP, and the added value of the secondary industry accounted for 20.8%. The added value of tertiary industry accounts for 28.2%. Nowadays, the service industry has become the first pillar of China’s economy, and the overall economic outlook has also changed.
Since the 18th National Congress of the Communist Party of China, a series of reform measures have been launched to cultivate and promote the development of new economy and new kinetic energy in service industry. Platform economy, sharing economy and digital economy have flourished, and the development of service industry has entered a new stage.

According to the data disclosed by the National Bureau of Statistics, from 2012 to 2018, the added value of China’s service industry increased from 24,485.2 billion yuan to 46,957.5 billion yuan, with an average annual growth rate of 7.9%, which was 0.9 percentage points higher than the average annual growth rate of GDP and 1.3 percentage points higher than that of the secondary industry. The proportion of service industry in GDP has further increased, increasing by 6.7 percentage points in six years, exceeding 50% in 2015 and reaching 52.2% in 2018, accounting for half of the national economy.
From 1978 to 2018, the contribution rate of service industry to GDP increased by 31.3 percentage points. Since the 18th National Congress of the Communist Party of China, the contribution rate of service industry to GDP has shown an accelerated upward trend, increasing by 14.7 percentage points in six years, which is close to half of the growth rate in the 40 years of reform and opening up, and reaching 59.7% in 2018, which is 23.6 percentage points higher than that of the secondary industry.

Zhang Jun, chief economist of Morgan Stanley Huaxin Securities, told China Business News that the rising proportion of service industry in China is an inevitable phenomenon as Chinese’s average income moves towards the level of middle-and high-income countries, with the economic structure shifting from investment and export-driven to more consumption-driven.
The ability of the service industry to absorb employment has been continuously enhanced. Driven by urbanization, a large number of agricultural transfer population and new labor force have entered the service industry, and the number of employees in the service industry has increased year after year. From 1979 to 2018, the average annual growth rate of employees in the service industry was 5.1%, which was 2.3 percentage points higher than that in the secondary industry. After the 18th National Congress of the Communist Party of China, the service industry continued to maintain a growth rate of 4.4%, with an average annual increase of 13.75 million employees. By the end of 2018, the number of employees in the service industry reached 359.38 million, accounting for 46.3%, making it the industry with the most employment in China.
Wu Jiang, former president of China Institute of Personnel Science, wrote an article analyzing that the service industry will have a stronger pull on employment in the future. During the "Thirteenth Five-Year Plan" period, with the accelerated growth of new technologies, new industries and new formats, the stratification and personalization of service industry will become more obvious, the employment capacity of producer service industry will increase, and the development momentum of modern service industry related to life is also very good.
The ability of service industry to attract foreign investment is also greatly enhanced, and service industry has become the first choice for foreign investment. After the reform and opening up, the scale of foreign direct investment is expanding day by day. From 1983 to 2018, the foreign direct investment increased from 920 million US dollars to 138.3 billion US dollars, with an average annual growth rate of 15.4%.
From the investment direction, before 2001, foreign investors mainly invested in manufacturing; After China’s accession to the WTO, the restrictions on foreign investment in the service industry have been further liberalized, and the proportion of foreign investment in the service industry has risen sharply. In 2005, the service industry accounted for only 24.7% of the foreign direct investment, and in 2011 it exceeded 50%, reaching 68.1% in 2018.
The transformation and upgrading of the service industry was promoted in an orderly manner.
Since the founding of New China 70 years ago, the service industry has changed from simple categories, low regional differences and single public ownership to complete categories, regional coordination and common development of multiple ownership systems. The industrial structure and industrial structure of the service industry are increasingly coordinated and optimized, and the quality and efficiency of development are steadily improved.
At the beginning of the founding of New China, the composition of China’s service sector was simple, and the content and form were relatively simple. In 1952, among the service sectors, the added value of wholesale and retail, transportation, warehousing and postal services, accommodation and catering accounted for 35.9%, 14.9% and 7.5% respectively, and the total was close to 60%, which constituted the main body of the service industry.
After 70 years of construction, the service industry has become more complete and the development of various departments has become more balanced. The proportion of traditional service industries, such as wholesale and retail, transportation, warehousing and postal services, accommodation and catering, has been declining, reaching 17.9%, 8.6% and 3.4% respectively in 2018, and the total is less than 30%, which is nearly half lower than that in the early days of the founding of New China.
Modern service industries, such as finance and real estate, have gradually strengthened their role in supporting the economy, accounting for 14.7% and 12.7% of the added value of the service industry in 2018, up 8.7 and 5.6 percentage points from 1952. Emerging service industries such as information transmission, software and information technology services, leasing and business services have experienced rapid development from scratch, and their influence is growing. In 2018, the added value accounted for 6.9% and 5.2% of the service industry respectively. At constant prices, the average annual growth rate in the past three years is as high as 23.4% and 9.9%, which has become a new kinetic energy to promote the sustained growth of the service industry.
Under the impetus of the Internet, the traditional service industries such as wholesale and retail, accommodation and catering have accelerated their transformation and upgrading, and they have relied on new technologies to develop new businesses and new business models such as e-commerce, online ordering and online retailing. From 2015 to 2018, the average annual growth rate of e-commerce transaction volume and online retail sales in China was 17.8% and 28.8% respectively; In 2018, the online retail sales of physical goods accounted for 18.4% of the total retail sales of social consumer goods.
In 2018, there were 15 regions in 31 provinces (autonomous regions and municipalities directly under the Central Government) where the added value of service industry accounted for more than 50% of the regional GDP. Among them, the proportion of added value of service industry in Beijing and Shanghai reached 81.0% and 69.9% respectively, which was close to the level of developed countries.
With the continuous growth of service industry, the trend of regional agglomeration and industry agglomeration has initially appeared. Regionally, the service industry is mainly concentrated in the eastern coastal areas. In 2018, the absolute added value of Guangdong, Jiangsu, Shandong, Zhejiang, Beijing and Shanghai ranked the top 6 in the country, accounting for 45.6% of the added value of the national service industry; From the industry point of view, information transmission, software and information technology services, leasing and business services are relatively high. Among the service enterprises above designated size, the sum of the top three provinces’ revenues has exceeded 50% of the national total.
Zhang Jun told the First Financial Reporter that since China’s service industry is still mainly focused on residents’ lives, it is still labor-intensive. On the one hand, it can better absorb the labor force, and in the future, it also needs a process of industrial upgrading, such as promoting the industrialization and marketization of high value-added service industries such as finance, medical care and education, and enhancing the competitiveness of these industries at home and abroad on the premise of meeting the basic needs of residents.
New kinetic energy of service industry accelerates gestation
Since the founding of New China 70 years ago, the service industry has actively adapted to the changes of the times, and new industries and formats have emerged one after another. Since the 18th National Congress of the Communist Party of China, the emerging service industry has flourished, new kinetic energy has thrived, and the service industry has ushered in a period of rapid development.
The producer service industry has entered a period of rapid growth, supporting the manufacturing industry to move towards the high end of the value chain. The new round of tax reform has opened up the tax deduction chain between the secondary and tertiary industries in time, which has effectively promoted the division of labor and integrated development of manufacturing and service industries, and the producer service industry has grown rapidly.
Zhang Yongjun, deputy chief economist of China International Economic Exchange Center, said that the producer service industry will continue to flourish, which is inseparable from China’s huge domestic market and perfect manufacturing system.
From 2016 to 2018, the operating income of producer service enterprises above designated size increased by 13.3% annually, which was 0.5 percentage points higher than that of service enterprises above designated size. Among them, the service industry, which is closely related to manufacturing production, is developing rapidly.
In 2018, the operating income of engineering design services, quality inspection technical services, intellectual property services, human resources services, legal services and advertising services above designated size increased by 18.0%, 10.3%, 25.1%, 20.1%, 17.5% and 17.5% respectively compared with the previous year.
According to industry insiders, the development of producer service industry has provided more professional service support for the manufacturing industry to move towards the high end of the value chain, which has effectively promoted the accelerated transformation of China’s industry from manufacturing to production service.
Since the 1990s, the in-depth development of the Internet has provided a strong impetus for the service industry. Internet companies have mushroomed in China, taking root and growing rapidly. After 2008, with the popularization of smart phones and 3G and 4G communication networks, the Internet began to rapidly penetrate into the daily life of the general public, and the number of Internet users rose sharply.

By the end of 2018, the number of Internet users in China reached 830 million, and the penetration rate of mobile phones reached 112 per 100 people, 2.8 times and 2.3 times that of 2008 respectively. Since the 18th National Congress of the Communist Party of China, modern information technologies such as big data, cloud computing and artificial intelligence have been continuously developed and matured, and the integration of the Internet and various industries of the national economy is accelerating. The digitalization and intelligence level of traditional industries have been continuously improved, and the sharing economy and digital economy have profoundly changed the social production and lifestyle and accelerated the reconstruction of the economic development model.
From 2012 to 2018, the added value of information transmission, software and information technology services increased from 1,192.9 billion yuan to 3,243.1 billion yuan. From 2014 to 2018, the average annual growth rate of operating income of Internet and related services, software and information technology service enterprises above designated size reached 32.8% and 21.2%, respectively, far exceeding the average annual growth rate of 11.1% in service industries above designated size.
Wei Wang, director and researcher of the Market Economy Research Institute of the State Council Development Research Center, wrote an analysis. In recent years, with the deepening application of information technologies such as the Internet, cloud computing and big data in the service industry, it has greatly promoted the rapid emergence of new industries, new formats and new models in the service industry. New formats and new services such as online shopping, sharing economy, online celebrity economy, short video, take-out and mobile payment have become the most important new kinetic energy for the development of China’s service industry and the leading global digital economy.
Wei Wang said, more importantly, in 2019, we will accelerate structural reform and open innovation, continue to promote market access reform of service industry, accelerate the establishment and improvement of post-event supervision system and mechanism, increase infrastructure investment and business environment optimization, and further improve the policy support system, which will help accelerate the release of market vitality and innovation power, further cultivate and expand new kinetic energy of service industry, promote the expansion and quality of service industry, and provide an increasingly powerful "stabilizer" and new development impetus for achieving sustained and stable growth of national economy.































