Empirical Analysis of China’s Service Sector Development and Strategic Transition

Ling Yonghui 1 and Liu Zhibiao 2

1 School of Business, Nanjing University, Nanjing, China
2 Yangtze Institute of Industrial Economy, Nanjing Universit

Abstract: Since reform and opening-up in 1978, the service sector has become the largest industry in China’s economy. Compared with developed countries, however, China’s servic sector, especially modern services, remains rather undeveloped in terms of its aggregate size and internal industrial structure. The underlying reason is that the international OEM model under an export-oriented strategy created both technology spillovers and crowdingout effects on domestic service firms. With the deepening global division of work, such a market crowding-out effect is outweighing the technology spillover effect. This paper suggests that China’s service sector must shift towards a domestic consumption-based strategy, utilize domestic and foreign production factors, and promote service sector innovation and development in differentiated monopolistic competition.

Keywords: reform and opening-up, service sector, export-oriented, domestic consumptionoriented

JEL Classification Codes: O14
DOI:1 0.19602/j .chinaeconomist.2019.3.0219602/

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