China Service Sector: Opportunities & Challenges Yang Li Yang Li Trade Representative Trade Representative Embassy of Iceland, Beijing Embassy of Iceland, Beijing

Controversies about China  China Miracle vs China Collapse  China Threats vs China Opportunities

% 35% 30% 25% 20% 15% 10% 5% 0% % of GDP Opium War Second Opium War Invasion of Allied Armies 1900 Cultural Revolution Opening-up & Reform 1978 Civil War Japanese invasion China Economic History in the World

27 Peaceful Years of 9% Average Annual Growth More Years of 8-10% Growth expected China Economic Growth China Economic Growth

Top 10 Economies in 2050 USD Billion

Top 10 Exporting Countries 2006

Top 10 Importing Countries 2006

Top 10 Trading Countries 2006

China Foreign Trade

Top 10 Service Importing Countries 2005

Top 10 Service Exporting Countries 2005

Top Service Trading Countries 2005

China Service Trade Balance

Balance of Trade Service 2005

Service Sectors of Biggest Export

China Service Trade: Sector Break-down 2005 Export (USD Million) Import (USD Million) Balance All service sectors 73,90983,172-9,263 Transportation 15, % 28, %-13,021 Tourism29, % 21, %7,537 Communications % %-118 Construction 2, %1, %974 Insurance %7, %-6,650 Financial service % %-14 Computer and IT 1, %1, %218 Royalties & license fee %5, %-5,164 Consulting service 5, %6, % -861 Advertisement1, % %361 Movies, Audio & Visual % %-20 Other business services 16, % 9, %7,497

China Service Trade – Growth Rate By Sector

Foreign Investment in Service Sector

Sector Actual investment (USD Million) New Foreign companies Financial sectors 12, Total Non-financial companies 11,6797,445 - Commercial service - Commercial service 1,078 1,0782,597 - Real Estate - Real Estate 5,390 5,3902,120 - Transportation - Transportation Computer and IT - Computer and IT ,295 Total service sector 23,760 Foreign Investment in Service Sector 2005

SectorValue (USD Million) % Leasing and commercial service 4, % Wholesale and retail 2, % Transportation, warehousing and postal service % Science research, technical service and geological survey service % Real Estate development % Other services, including % - Public management and social organization service - Public management and social organization service Resident service and other services - Resident service and other services IT, computer service, software - IT, computer service, software Water conservancy, environmental and public facility management - Water conservancy, environmental and public facility management Total8,118 China Investment Abroad 2005

Great Potentials  Domestic Market: 1. Market potential 2. Fast development 3. Minimum market share for foreign companies 4. Wider market opening

Great Potential: International Market

Obstacles  Insufficient legislation: Monopoly & governmental effort  Sector and regional imbalance  Cultural factors  Long-term strategy: Fish-go vs Sow-harvest

The Diaspora 55 million people GDP: USD 1000bn The Coast 375 million people GDP: USD 550 bn The Hinterland 580 million GDP: 400bn The margins 20 million people GDP: USD 110bn The Rust Belt 110 million people GDP: USD 120 bn China multitude: the Very Basic

Opportunities & Challenges ? Know the enemy and know yourself; in a hundred battles, you will never be defeated -- Sun Wu, 551 – 479 B.C.  How much do I know about the sector  Where are the customers & competitors  Do I have the resources  Is it the right time  Do I have the time frame  ….

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