Green dream for China's reforms

A larger service sector will support economic restructuring and the achievement of important social and environmental targets discussed at the plenum. Other countries' experiences show that services play a major role in improving production efficiency, and promoting technical progress and innovation. And since the carbon footprint of the service sector is significantly smaller than that of manufacturing, greater reliance on the service sector will support green growth.

The service sector in China has expanded rapidly since the introduction of reform and opening-up, especially since the country's entry into the World Trade Organization. But its size is still smaller than expected considering the country's per capita income level. While manufacturing will remain a significant driver of economic growth in the coming years, the service sector, through adequate policy changes, has the potential of becoming an important source of growth while addressing the unemployment problem and fostering green growth.

Interestingly, synergies arise from the interaction of expanding services and urbanization, the latter being another key objective of the plenum's decision. This is because a certain critical mass, together with access and affordability of services, is needed for the demand for services to thrive. At the same time, the scale and structure of the service sector depend on the level of urbanization. For this reason, a larger service sector would help absorb the increased rural-urban migration that the announced urbanization plans would trigger, underpinned by the gradual relaxation of hukou, or household registration, and reduce the carbon footprint of the expanding cities.

The direction of China's urbanization and environmental management will have a wide-ranging impact across the globe. In effect, it would be important to broaden the definition of successful urban development to include not only economic performance, but also environmental and social outcomes. Against this background, greater urbanization should be undertaken under the framework of a low-carbon economy to ensure environmental sustainability. Advancing green urbanization would thus entail substantial investments in urban infrastructure to accommodate and address the needs of the increasing number of rural residents moving to cities.

The ADB, the region's key development partner, stands alongside the Chinese government in its efforts to move toward green growth. China can be assured of our continued support because we work together to achieve the same goals. In this connection, the ADB has pledged support for China's green and inclusive growth by committing $4.2 billion in the next three years to key development projects, including urban development, energy efficiency, sustainable transport and natural resources conservation.

The author is director general of East Asia Department, Asian Development Bank.