Academic journal article China: An International Journal

The Changing Comparative Advantages and Structure of China's Service Exports

Academic journal article China: An International Journal

The Changing Comparative Advantages and Structure of China's Service Exports

Article excerpt

Introduction

As an important part of international trade, global exports of services have undergone rapid development since the 1980s. They grew faster than merchandise exports in most of the years. The service export value of services in 2007 was more than 8.5 times that of 1982. This is even true in the case of China. China's service exports soared during the last quarter century, increasing in value from $2.51 billion in 1982 to $117.15 billion in 2007, an increase of nearly 46 times. (1) The years since the late 1990s have witnessed steady growth in China's service exports. Meanwhile, China's rank in service trade has risen from 29th in 1982 to 7th in 2007 (see Table 1). Over the same period, its share in global service exports increased from 0.6 per cent to 3.5 per cent and the relative export share (RES) of China's trade in services soared from 3.9 per cent to 24.5 per cent. (2)

Services were one of the key topics in the negotiation of China's accession to the World Trade Organization (WTO). China's commitments to the General Agreement in Trade and Services (GATS) represented the most radical services reform programme negotiated in the WTO. The country's service sector has undergone major reforms in accordance with its commitments under GATS. Sheng conducted a quantitative study of China's trade liberalisation in services. This study suggested that China committed more in opening its service sector than a developing member should have. (3) Matto reached a similar conclusion. (4) However, China's service trade position in the world remains weak. China's openness in services is 13 per cent to 20 per cent that in merchandise. (5)

Nevertheless, the comparative advantages (CA) and structure of China's service exports have been changing since the country opened its doors to the outside world in the late 1970s. Most studies of China's service exports focus more on CA than structure, and less on the link between CA and export structure. The purpose of this paper is to examine the changing CA and export structure of China's service sectors, with a view to linking them.

Literature Review

Some scholars have studied the CA and international competitiveness of China's service exports after its accession to the WTO. Trade Competitiveness (TC) and Revealed Comparative Advantage (RCA) are two of the most frequently used indicators to measure China's CA in service trade. (6) Zhang used these two indicators to analyse the competitiveness of China's trade in services. Her study showed that China, on the whole, was weak in international service trade. (7) Wang furthered the study to sub-sectors and reached similar conclusions on the whole and at the sectoral levels. Wang found that China was weak in service sectors except travel and "other businesses", especially the high-value-added sectors such as finance, insurance and information services. (8)

Chen constructed two samples to study the RCA of China's trade in services for 2002. He found that China was weak in service exports as a whole, and at the sectoral level only travel and communication services had obvious CA. (9) Compared with other economies, Wang and Gao argued that China's services and most service sectors were generally far behind world averages. Zhao and Li divided services into labour-intensive services, capital-intensive services and technology-intensive services. (10) China was comparatively weak in services as a whole and was especially poor in the case of some capital-intensive services and technology-intensive services.

Tang discussed China's trade in services in terms of openness, trade volume and trade structure. She found that service development in China did not keep pace with its economic development, and that the export structure of services was not reasonable. (11) Xu reached the same conclusion. (12) Qin and Kong argued while China's service export structure has improved, it was still unreasonable, as it was dependent too much on travel services (resource-intensive services) and transportation services (labour-intensive services) and not enough on knowledge- and technology-intensive services. …

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