Commentary: To Fuel Its Future, China Must Open Up Services

Summary

The State Council’s 15th thematic study session in August 2025 emphasized promoting institutional opening in China’s trade in services and using service imports to stimulate the domestic service sector. This policy direction reflects global economic patterns, where the share of services in GDP rises as economies develop, shifting resident consumption from goods to services when per capita GDP is between $10,000 and $30,000 and the urbanization rate approaches 70%. China, currently within this developmental window, lags behind peers in both the growth of its service sector and in service consumption, with post-pandemic recovery still not fully closing the historical trend gap [para. 1][para. 2][para. 3][para. 4][para. 5].

From 2017 to 2024, China’s service sector saw only moderate growth; its contribution to GDP increased in spurts primarily during two periods—1997-2002 and 2012-2016—while more recent years have aligned with nominal GDP growth. In 2024, service consumption surpassed pre-pandemic levels, but per capita service consumption remains 1,923 yuan ($265) below its historical trend. Meanwhile, the ratio of service trade to GDP, which peaked in 2014 (1%), was still only 0.7% in 2024 despite an average annual growth of 18% in total service trade since 1994 [para. 4][para. 5][para. 6].

China’s policy reforms have increasingly stressed external rather than just internal market unification, exemplified by the August 2025 State Council meeting’s call to expand high-quality service imports and align with international economic rules. Since 2023, China has aggressively reduced service sector restrictions, with the OECD’s Service Trade Restrictiveness Index (STRI) falling from above 0.27 to 0.23 in 2024, moving China from the 80th to the 65th percentile among surveyed nations [para. 7][para. 8]. The travel sector illustrates tangible progress: in 2024, travel exports nearly doubled year-on-year, reaching 283.12 billion yuan and boosting GDP growth by 0.1%. Inbound tourism also contributed about 0.7% to growth in total retail sales [para. 9].

China’s service sector opening has evolved through several stages: after an initial policy exploration phase (2001-2012) focused on WTO commitments, institutional innovation followed (2013-2020), highlighted by free-trade pilot zones and negative lists, and encompassing emerging industries like healthcare, culture, and tech. The current era emphasizes comprehensive and high-level opening, as seen in multi-city pilot programs and proactive alignment with global agreements like CPTPP and DEPA. Recent years have brought notably greater openness in computer services, warehousing, program production, and accounting [para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17].

Looking ahead, further opening will focus on harmonizing China’s rules with high-standard international frameworks. This includes advancing negative lists for cross-border trade in services, promoting liberalization of telecom, internet, education, culture, and healthcare sectors, and closing key regulatory gaps—especially in digital trade, according to DEPA benchmarks. Despite advances, China’s STRI in sectors like accounting, program production, and telecommunications remains significantly higher than in the U.S. and Europe [para. 18][para. 19][para. 20][para. 21][para. 22].

Future pilot programs will prioritize opening up digital industries (e.g., software, internet businesses, game exports), healthcare and wellness (foreign capital in biotech, easing professional accreditation), and financial services (cross-border capital flows, digital currency pilots, integration with overseas markets). These reforms, if realized, will enable a more transparent, stable, and globally competitive Chinese service sector [para. 23][para. 24][para. 25][para. 26][para. 27][para. 28][para. 29][para. 30][para. 31][para. 32][para. 33][para. 34].