Service Industry Growth Key for China’s Economy

Services had the biggest share of China’s employment in 2011 for the first time, larger than agriculture’s 34.8 percent and manufacturing’s 29.5 percent, according to the most recent labor-ministry data. The gains have helped the Communist Party maintain social stability by keeping a lid on unemployment, estimated by a research center at more than 8 percent in urban areas in July.

“The robust services job growth is helping to create a resilient job market,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, who previously worked for the World Bank. At the same time, prospects aren’t so bright in the future because of slowing economic expansion, Xu said.

Employment growth in services is important because of a direct link with boosting consumption, the IMF said in a 2010 working paper, noting gains that other export-dependent nations had previously made. In South Korea, the share increased to about 65 percent in 1995 from 30 percent in 1961. Japan’s level rose to about 60 percent in 1987 from 1955’s 38 percent.

The typical country at China’s income level has close to half of its workers in services, according to Mark Williams, an economist at Capital Economics Ltd. in London who previously advised the U.K. Treasury on China.


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