Chinese economy cannot walk on one leg

Economic data in the first three quarters of this year show that despite the challenges of the pandemic, rising commodity prices and energy shortages, the economy as a whole has maintained a strong recovery trend, and the main macro indicators are in a reasonable range.

In recent years, China has focused on supply-side structural reforms, emphasizing the development of the real economy and technological innovation. It can be seen that up to now, the development of the real economy has progressed rapidly as a result.

But catching up in the manufacturing sector is relatively easy, because the direction, competitors and technology required are visible and certain. As long as the investment is solidly increased and the upstream and downstream cooperation of the industry chain is achieved, the manufacturing sector can develop rapidly.

The big challenge for the Chinese economy is the weak innovation and low efficiency of the country's service sector.

Historical lessons show that the advanced economies have been able to upgrade their manufacturing industries to the top of the industrial chain, while making their service industries among the most efficient and competitive in the world. While those countries that failed to escape the middle-income trap not only de-industrialized before upgrading their manufacturing sector, but also relied heavily on inefficient and labor-intensive services.

How can China upgrade its manufacturing industry and improve the efficiency of the service industry? The key is to develop a production service industry, that is those activities that serve to aid production processes. Such as R&D, consulting, design, marketing and such.

China's production services sector is still undeveloped, mainly due to irregular systems, low levels of demand and lack of innovative talents.

To achieve the high-quality development of the sector, the authorities need to attach greater importance to the development of the production service sectors, which requires the accumulation of human capital, the opening-up of the service sectors and the promotion of high-level competition.

China should also actively improve the efficiency of the large-scale, low-end service industry through the application of digital technology. Due to the large base of the low-end service industry, improving its efficiency growth is crucial to the overall improvement of China's service industry.

- 21st Century Business Herald