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I.Trade in services between residents and non-residents
(I). General analysis on of services exports and imports
In 2007, China's trade in services (as per BOP statistics, excluding government services, the same as below) continued its fast growing momentum, with total imports and exports amounted to USD 250.91 billion, up by 30.9% over 2006, with the growth rate rising 8.8 percentage point over the previous year. Of which, services exports reached USD 121.65 billion, an increase of 33.1%; services imports stood at USD 129.26 billion, an increase of 28.8%.
In 2007, China's services exports grew faster than imports. Deficit in services trade shrank noticeably to USD 7.61 billion, down by 14.6 percent over the previous year, and 20.3% lower than the largest deficit in 2004, the year with the largest trade deficit in services. By sector, eight services sectors registered surplus, of which the four sectors with the largest surpluses were other business services, travel, construction, and computer and information services, together totaling USD 20.73 billion. Construction services had the largest increase in surplus, standing at USD 2.47 billion, up by 250% over the previous year. China’ s trade deficit in service were mainly from three services sectors namely transportation, insurance services, and royalties and license fees, which have been the top three sectors with the largest trade deficits since 1999. In 2007, deficit in transportation services stood at USD 11.95 billion, down by 10.5% over 2006; deficit in insurance stood at USD 9.76 billion, up by 17.8 % and the deficit in royalties and license fees reached USD 7.85 billion, up by 22.1 %.
In 2007, China’s exports of travel service stood at USD 37.23 billion, an increase of 9.7% over the previous year. Although its export growth rate was the lowest among all services sectors, it remained the largest sector in terms of services exports. Exports of transportation services reached USD 31.32 billion, an increase of 49.1% over 2006, with the growth rate rising by 12.9%. The total import and export volume of travel and transportation services, the two traditional services sectors, totaled USD 141.61 billion, up by 24.6% over 2006, slower than the average growth of the trade in services. The share of travel and transportation services in total trade in services dropped from 59.3% to 56.4%.
In 2007, exports of high value-added service sectors represented by communication, insurance, financial service, computer and information services, and consultancy maintained a good momentum. The exports of communication services reached USD 1.17 billion, up by 59.2% year on year, reversing the deficit in this sector in recent years. The exports of insurance services stood at USD 900 million, an increase of 64.9% over 2006. The exports of computer and information services amounted to USD 4.34 billion, up by 46.9% year on year. As the fastest-growing sector of trade in services, the exports of films and audiovisual services reached up to USD 320 million, up by 130% year on year, reflecting the strong growth of Chinese cultural services.
In 2007, China ranked No.7 and No.5 in the world for its services exports and imports. Of which, China’s export of services exceeded that of Italy, moving up one place over 2006, and import surpassed that of France and Italy, moving up two places. The shares of China’s service exports and imports in the world were 3.7% and 4.2% respectively, up by 0.3% and 0.4%.
(II) Analysis by country/region
In 2007, Hong Kong SAR, the US, EU, Japan and the ASEAN are the top five services trading partners of China. China’s import and export volume of trade in services with these five partners totaled USD 169.56 billion, accounting for 66.8% of China's total import and export of services. Among them, Hong Kong took the first place, with total imports and exports totaling USD 51.53 billion, accounting for 20.5% of China’s total trade in services.
In terms of export, Hong Kong is largest destination of China's service imports. In 2007, China exported USD 31.02 billion services to Hong Kong, accounting for 25.5% of China’s total services exports. Hong Kong was the largest market for China’s services exports, followed by the US, EU and Japan, with their shares in China’s services exports being 14.9%, 13.1% and 8.7% respectively.
In terms of import, EU, Hong Kong, the US and Japan are largest sources for China’s services imports. In 2007, China’s service imports from the above four countries and regions all exceeded tens of billions of dollars, with their shares in China’s total services imports being 16.1% and 15.9%, 14.9% and 10.3% respectively.
In 2007, China enjoyed the largest trade surplus in services with Hong Kong, totaling USD 10.51 billion, far more than those with other countries (regions). The largest source of deficit was EU, followed by Australia and Japan.
(III). Analysis by sector
1. Transportation
In 2007, China's exports and imports of transportation services expanded quickly, with the export volume of USD 31.32 billion, a 49.1% increase, and the import volume of USD 43.27 billion, a 25.9% increase. As the growth rate for China’s exports of transport services was much higher than that for China’s imports of transportation services, deficit in transportation services declined by 10.5% to USD 11.95 billion; transportation is still the service sector with the largest deficit.
From 2000 through 2007, the average annual growth rate for China's exports of transportation services was 35.8%, and the share of transportation in China's service exports rose from 12.2% to 25.7%, second only to tourism to be the second largest sector in terms of service exports; In the same period, the average annual growth rate for China's imports of transportation services was 22.6%, and the share of transportation in China's service imports increased from 29% to 33.5%, making transportation a sector with the largest import.
In 2007, Hong Kong, the US, and EU were the first three largest destinations for the transportation services of the Chinese Mainland, together accounting for about two thirds of China’s total exports of transportation services. In 2007, the US, EU and Hong Kong are the three major import markets for China’s transportation services, each accounting for 10% of China’s total imports of transportation services, and together accounting for nearly half. Hong Kong was the largest source for import of transportation services, and China’s trade deficit in transportation services was for the most part due to its trade with such countries or regions as Taiwan, ASEAN, ROK, the US and Japan.
2. Travel
In 2007, the growth rate for China’s imports of travel services was significantly higher than that for exports, with the export volume of USD 37.23 billion, a 9.7 % increase, and the import volume of USD 29.79 billion, a 22.5 % increase. Travel was the largest service sector in terms of export and the second largest sector in terms of import, second only to transportation. The growth rate for China’s imports and exports of travel services were both lower than the average level of China’s imports and exports services, with its share in China’s trade in services continuing to decline.
From 2000 through 2007, China’s imports of travel services grew at an average annual growth rate of 10.8%, with its share in China’s services imports declining from 36.6% in 2006 to 23% in 2007; China’s exports of travel services grew at an average annual growth rate of 12.6 %, with its share in China’s services exports declining from 53.8% in 2006 to 30.6% in 2007. China’s trade in travel services maintained long-term surplus, increasing from USD 3.12 billion in 2000 to USD 7.45 billion in 2007.
In 2007, the export markets for China’s travel services were mainly Asian countries and regions including Hong Kong, Taiwan, ROK, Japan and ASEAN, accounting for nearly 70% of the total export volume of travel services. Hong Kong, the US, EU, Japan and Australia were the five largest sources for China’s imports of travel services, together accounting for 60% of China’s total import volume of travel services.
3. Communication services
In 2007, China’s trade in communication services has grown much rapidly, with the export volume of USD 1.17 billion, a 59.2% increase, and with the import volume of USD 1.08 billion, a 41.6% increase, turning the balance of trade in communication services from deficit since 20004 to a surplus of USD 90 million in 2007. From 2000 through 2007, China's trade in communication services has first experienced a sharp decline before rose steadily, and gained good momentum in recent two years. In the same period, China’s imports of communication services grew at an average annual rate of 23.9%, higher than the average growth rate of China’s services imports.
In 2007, the US surpassed EU to become the largest export market for China’s communication services, followed by Hong Kong, EU, Japan and ROK. They together accounted for more than three-quarters of the total exports of China’s communication services. In terms of imports, the US was still the largest source for China’s communication services, followed by Hong Kong and EU. They together accounted for over 80% of China’s total import volume of communication services. ROK, Japan and Taiwan are the three countries and regions with the largest surplus of communication services.
4. Construction services
In 2007, China’s exports of construction services stood at USD 5.38 billion, up by 95.3% over 2006, and its imports of construction services totaled USD 2.91 billion, up by 42%. From 2000 through 2007, China’s export of construction services grew at an average annual rate of 36.7%, and its share in China’s export of services rose from 2% to 4.4%. Over the same period, China’s imports of construction services grew at an average annual rate of 16.6 %, lower than the average annual growth rate of China’s services imports. In this sector, surplus has replaced deficit since 2002, and the surplus in 2007 reached USD 2.47 billion.
In 2007, the top five destinations for China’s exports of construction services were Hong Kong, the US, Canada, ASEAN and EU, together accounting for more than 40% of the total exports of China’s construction services. China’s imports of construction services imports were mainly concentrated in ASEAN, Hong Kong, the US and EU, the four together accounting for about 45% of the total. Surplus in China’s construction services mainly came from Hong Kong, Canada and the US.
5. Insurance services
In 2007, China’s exports of insurance services reached USD 900 million, down by 64.9% over 2006 and its imports of insurance services USD 10.66 billion, up by 20.8%. From 2000 through 2007, China’s exports of insurance services grew at an average annual rate of 35.5%, and its share in China’s exports of insurance services rose from 0.4% to 0.7%. In the same period, China’s imports of services grew at an average annual rate of 23.2%, and its share in China’s imports of services rose from 6.9 % to 8.3%. Deficit in China’s insurance services kept expanding, and reached USD 9.76 billion in 2007, making it a
sector with the second largest deficit, merely next to transportation services.
Chinese Mainland’s exports of insurance services were relatively concentrated in certain countries and regions. In 2007, the three largest destinations for China’s insurance services were Hong Kong, EU and the US, together accounting for about 80% of Chinese Mainland’s export of insurance services. The Mainland’s imports of insurance services were relatively limited and occasional, from a multitude of countries and regions including Japan, EU, ASEAN, ROK, Taiwan and other countries and regions, with the import volume from each no more than USD 1 billion. In 2007, China’s trade in insurance services still remained to be in deficit, with Japan, EU, ASEAN, ROK and Taiwan the top five sources of deficit.
6. Financial services
In 2007, due to the drop in the imports of China's financial services, the total imports and exports volume of China’s financial services fell by 24.1%. Of which, the exports of financial services stood at USD 230 million, up by 58.5% over 2006 and the imports of financial services stood at USD 560 million, down by 37.5%. Deficit in China’s trade in financial services reached USD 330 million, a 55.4% decrease. From 2000 through 2007, exports of China's financial services grew at an average annual rate of 16.8 %, but its share in China's total service exports fell slightly; imports of China's financial services grew at an average annual rate of 28.3 %, and its share in China's total service imports increased to certain degree.
In 2007, the US replaced Hong Kong to become the largest destination for China’s financial Services, followed by Hong Kong, Japan, and their shares in China's exports of financial services all exceeded 10%; in 2007, Hong Kong was the largest source for China’s imports of financial services, accounting for 1/4 of the total, followed by EU and the US. The three together accounted for about 60% of China's imports of financial services. China generally recorded deficit in the trade of financial services with other major countries (regions).
7. Computer and information services
In 2007, China’s exports of computer and information services reached USD 4.34 billion, up by 46.9% over 2006, and its imports of computer and information services USD 2.21 billion, up by 27%. The surplus rose remarkably by 75.3% over 2006. From 2000 through 2007, China’s export of computer and information services expanded at an average annual rate of 43%, and its share in China’s export of services went up from 1.2% to 3.6%. In the same period, China’s imports of computer and information services grew at an average annual rate of 35.4%, with its share in China’s export of services rising from 0.7% to 1.7%.
In 2007, the US, ASEAN, EU, Hong Kong and Japan were the five largest export markets for Chinese Mainland’s insurance services, together accounting for 95% of Chinese Mainland’s export of computer and information services. EU was the largest source of Chinese Mainland’s import of computer and information services, accounting to more than 40%. Next to it were the US and Hong Kong, with the three together accounting for over 75%. In this sector, the surplus was for the most part attributable to the US, ASEAN and Japan.
8. Royalties and license fees
In 2007, China’s exports of royalties and licenses reached USD 340 million, a 67.5% increase over 2006, and its imports of royalties and licenses USD 8.19 billion, a 23.5% increase, with a deficit of USD 7.85 billion, up 22.3%. From 2000 through 2007, China’s export of royalties and license services increased at an average annual rate of 23%, and its share in China’s export of services almost kept the same. In the same period, China’s imports of royalties and license services grew at an average annual rate of 30.4%, with its share in China’s imports of services rising from 3.6% to 6.3%. In royalties and license fees, China had a deficit for a long time, which kept growing, making it a sector with the third largest deficit.
The US was the largest export market for Chinese Mainland’s royalties and license services, followed by Hong Kong and EU, together the three accounting for over 70% of Chinese Mainland’s export of royalties and license services. Its import was mainly concentrated in developed countries like the US, EU and Japan, together taking up over 3/4 of the total. In this sector, the deficit was for the most part attributable to the US, EU, Japan and the ROK.
9. Consulting services
In 2007, China’s exports of consulting services grew much fast than imports of consulting services, changing the deficit of consulting service sector lasting from 2000. Of which, China’s exports of consulting services stood at USD 11.58 billion, up by 47.8% over 2006, and its import of consulting services USD 10.86 billion, up by 29.4%. From 2000 through 2007, China’s exports of consulting services expanded at an average annual rate of 64.5%, and its share in China’s export of services climbed to 9.5% from 1.2%. In the same period, China’s imports of consulting services grew at an average annual rate of 49.9%, with its share in China’s import of services rising from 1.8% to 8.4%.
Chinese Mainland’s exports of consulting services were mainly directed to the US, Hong Kong, EU and Japan, which together accounted for over 80% of China’s export of consulting services. EU remained to be the first source for China’s imports of consulting services, followed by Japan, Hong Kong and the US, with the four together accounting for 80% of China’s imports of consulting services. In this sector, the surplus was for the most part attributable to the US, Hong Kong and EU.
10. Advertising, publicity
In 2007, China’s imports and exports of advertising and publicity services both increased by over 30%, with its exports being USD 1.91 billion, a 32.3% increase over 2006, and its import USD 1.34 billion, a 40% increase. From 2000 through 2007, China’s exports of advertising and publicity services expanded at an average annual rate of 35.9%, and its share in China’s exports of services rose from 0.7% to 1.6%. In the same period, China’s imports of advertising and publicity services grew at an average annual rate of 31%, with its share in China’s imports of services rising from 0.6% to 1%. In this sector, there has been a surplus for five consecutive years.
In 2007, the five largest export markets of China’s advertising and publicity services are the US, EU, Hong Kong, Japan and ASEAN, which together accounted for 90% of Chinese Mainland’s total exports of advertising and publicity services. Hong Kong remained to be the largest source of Chinese Mainland’s import of advertising and publicity services, accounting for over 1/3. Next to it were EU and the US, with the three together accounting for 3/4 of Chinese Mainland’s imports of advertising and publicity services. The surplus in advertising and publicity services were for the most part attributable to Japan, ASEAN and the US.
11. Film, audiovisual services
In 2007, China exports and imports of film and audiovisual services worth of USD 320 million and USD 150 million respectively, increased by 130% and 26.5% over 2006, with a surplus of USD 160 million. From 2000 through 2007, China’s exports of film and audiovisual services expanded at an average annual rate of 61%，and its share in China’s export of services was only 0.26%, still very small. In the same period, China’s import of film and audiovisual services grew at an average annual rate of 22.4%, with its share in China’s imports of services unchanged.
In 2007, the markets for Chinese Mainland’s export of film and audiovisual service mainly concentrated in Hong Kong, the US and Switzerland, which together accounted over 80% of the total. The US replaced Hong Kong and became the first source for Chinese Mainland’s imports of film and audiovisual services, followed by EU and Hong Kong. In this sector, the surplus was mainly attributable to Hong Kong, Switzerland and the US.
12. Other business services
The year 2007 saw a considerable growth in China’s imports and exports of other business services. Of which, its exports reached USD 26.91 billion, up by 36.7% over 2006, and its imports USD 18.24 billion, up by 62%, with a surplus of USD 8.68 billion. It became the sector with the largest surplus. From 2000 through 2007, China’s exports of other business services grew at an average annual rate of 21%, and its share in China’s export of services dropped to 22.1% from 23.5%. In the same period, China’s imports of other business services went up at an average annual rate of 16.9%, with its share in China’s export of services felling to from 17.1% to 14.1%.
In 2007, China’s exports of other business services were mainly directed to Hong Kong, the US and EU, which together accounted for 2/3 of China’s total exports of other business services. Hong Kong, EU and the US were the first three sources for the imports of other business services, together accounting for about 60% of the total. In this sector, the surplus was mainly ascribed to the US and Hong Kong.
II. Commercial presence
Commercial presence, the third mode of trade in services as defined in General Agreement on Trade in Services, directly reflects the degree to which one country’s service trade sector is open to the outside as committed.
(I). Commercial presence in trade in services in China
Since China’s entry to WTO, China has gradually lifted the limits on the foreign investment in services sectors in aspects such as geographic regions, equity and business scope. Services sectors were more open to the outside, resulting in attraction of more foreign investment and further expansion of commercial presence in China.
By the industry classification standard of WTO, in 2007, there were 16165 newly-established foreign-funded enterprises in China’s trade in services sector ( including banking, insurance and securities), up by 7.4% over 2006, accounting for 42.7% of the foreign-funded enterprises newly established in China, up by 25.5 percentage point. Paid-in foreign investments in the services sector totaled USD 39.44 billion, a 51.8% year-on-year increase, having a 47.2% share in China’s paid-in foreign capital, up by 16.8 percentage point over 2006. Of which, in the non-financial service sectors there were 16148 more foreign-funded enterprises established in China, a 7.5% year-on-year increase, and the paid-in foreign investment amounted to USD 30.69 billion, a 57.1% year-on-year increase.
In 2007, China’s services sectors that received foreign direct investment featured the following：
1. Real estate sector remained to receive the largest foreign direct investments in services industries.
In 2007, in this sector there were 1444 more foreign-funded enterprises in China, down by 40.1% over 2006. Although it had only 8.9% share in the total foreign-funded enterprises newly established in China, the paid-in foreign investments in this sector was USD 17.09 billion, up by 107.7% over 2006, accounting for 43.3% in the total foreign direct investment in China’s service industry, making real estate continue to be a sector with the largest foreign investment among services sectors.
2. Banking and security sector kept receiving large volume of foreign investment.
In 2007, China’s banking, security and insurance sector kept receiving large volume of foreign investment. There were 17 more foreign-funded enterprises established in China, a 19.1% year-on-year decrease, with a paid-in foreign investment of USD 8.75 billion, up by 35.7%, accounting to 22.2% of the total foreign investments in China’s service industry. Since 2005, China’s banking and security sector kept receiving large volume of foreign investment.
3. Foreign investments in public facility sector grew rapidly.
In 2007, there were 95 newly-established foreign-funded enterprises in the public facility sector, up by 14.5% over 2006, with the paid-in foreign investment being USD 190 million, up by 127.6% over 2006. Although it only accounted for 0.6% of the total foreign investments received in the non-financial service sector, it grew enormously.
4. Foreign investments in the financial sector fell slightly.
In 2007, in the financial sector (excluding banking, insurance, securities), there were 51 more foreign-funded enterprises, a 1.9% decrease over 2006, with the paid-in foreign investment being USD 260 million, down by 12.4%, respectively accounting to 0.3% and 0.7% of the total foreign direct investment received in the trade in services sector.
5. Paid-in foreign investments in construction and related engineering services sector declined greatly over the previous year.
In 2007, in construction and related engineering services sector, there were 308 newly-established foreign-funded enterprises, a 12.5% year-on-year decrease, with the paid-in foreign investment being USD 430 million, down by 36.9%. Since it only occupied 11% of the total foreign investments in China’s service industry, its decline does not affect the rapid growth of foreign investments in China’s service industry in entirety.
According to preliminary estimations, in 2007, the sales (business) revenue within China by non-financial foreign affiliates in China totaled USD 118.14 billion, a 29.4 year-on-year increase; there were 42386 non-financial foreign affiliates in China with 3.456 million employees including 168,000 from overseas.
(II).Chinese commercial presence abroad in trade in services
In 2007, the outward foreign direct investment from China’s service industries (according to the standard as specified in Industrial Classification for National Economic Activities) stood at USD 19.57 billion, up by 71.9% over 2006, and its share in China’s total outward foreign direct investments was 73.8%, rising by 20 percentage points over 2006. Of which, the outward foreign investment from the financial sector amounted to USD 1.67 billion, down by 52.7% over 2006, and that from the non-financial sector USD 17.9 billion, up by 128% over 2006.
In 2007, overseas direct investment in China’s service industry featured the following:
1. Outward foreign direct investments were mainly concentrated in traditional service sectors, with rapid growth.
In 2007, in respect of outward foreign direct investment, the top three sectors were wholesale and retail services, leasing and business services, transportation, warehousing and postal services, accounting for 83.2% of the total outward foreign investments in China’s service industries. Of which, outward foreign investments to wholesale and retail services, the largest sector among them, reached USD 6.6 billion, accounting for 33.7% of the total outward foreign direct investments to service sector that year, increased by 4.9 times over 2006(the figure decreased by 50.7% in 2006). In leasing and business services, the second largest sector among them, outward foreign direct investments totaled USD 5.61 billion, accounting for 28.7% of the total outward foreign direct investments to service sector that year, a 24% year-on-year increase. In transportation, warehousing and postal services, the third largest sector among them, outward foreign direct investments was USD 4.07 billion, accounting for 20.8% of the total outward foreign direct investments to service sector that year, a 195.4% year-on-year increase.
2. Outward foreign direct investments to financial sectors declined enormously.
By the end of 2007, China’s accumulated outward foreign direct investments to financial sectors reached USD 16.72 billion, or 14.2% of China’s accumulated outward foreign direct investments. Of which, in banking services, the largest sector among them, accumulated outward foreign direct investments reached USD 11.29 billion, accounting for 67.5% total outward foreign direct investments to financial sectors. In the insurance sector, it reached USD1.21 billion, accounting for 7.2% of the total. The outward foreign direct investments to banking services were mainly contributed by state-owned commercial banks. By the end of 2007, there were altogether 33 branches, 19 affiliates established overseas by China, with over 26,300 employees, of which 25,600 were foreign employees. By the end of 2007, there were 12 insurance financial organizations established overseas by China.
However, in 2007, China’s outward foreign direct investments to financial sector declined enormously after several-year steady growth, totaling USD 1.67 billion in 2007, down by 52.7% over 2006, with its share in total outward foreign direct investments to services sector declining from 31% in 2006 to 8.5%. China’s newly established branches and affiliates of banks overseas also decreased by 29.8% and 55.8% respectively. There remains 12 insurance financial organizations established overseas by China.
3. Outward foreign direct investments in emerging services sectors represented by information transmission and computer and software sector maintained good momentum.
In 2007, China’s out forward foreign direct investment to nine emerging or modern services sectors including information transmission, computer and software, real estate, culture, sports and entertainment stood at USD 1.62 billion, accounting for only 8.3% in China’s total outward foreign direct investments to services sector that year. In spite of a small sum and a small share, it surged up 92.9% on a year-on-year basis. Of which, information transmission, computer and software industry increased by 5.3 times, culture, sports and entertainment by 5.7 times, real estate by 1.4 times, which are the fastest growing sectors in terms of outward foreign investments.
III. Analysis on the Movement of Natural Persons
In 2007, about 200,000 natural persons from abroad came to China.
In 2007, China dispatched a total of 372,000 persons of all types (including labor services providers in overseas project contracting, labor service cooperation and consulting and designing services with foreign countries and regions), or 21,000 persons more than 2006. By the end of 2007, there were 743,000 persons employed overseas, or 68,000 persons more than 2006. By the end of 2007, the accumulated number of Chinese employees dispatched abroad was 4.19 million.
By 2007, the turnovers from China’s labor services cooperation and from China’s consulting and designing services with foreign countries and regions accumulated to USD 47.77 billion and USD 2.22 billion respectively. Of which, the turnovers from China’s labor services cooperation with foreign countries and regions reached USD 6.77 billion, up by 26.1% over 2006, with growth rate up by 14.2 percentage point. Turnover from China’s consulting and designing services with foreign countries and regions were USD 490 million, up by 48.5% over 2006.
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