The services sector has become one of the most talked about growth opportunities in China; services contributed 51% of China’s GDP last year, up from 44% in 2011. Whilst it is still short of the 80% in the US, the 16.8% growth in the foreign service trade in the first 4-months of 2016 illustrates that there are plenty of opportunities for service exports ahead. China already imports significantly more services than it exports, with a trade deficit of $159.9 billion in 2014, versus just $9.3 billion in 2005.
Like most things in China, the growth of the services trade hasn’t been evenly dispersed by region. Provinces that are transitioning to service-based economies are growing two-or-more times faster than those focused on traditional Chinese commerce such as coal and heavy industry.
Shanghai is a shining example of China’s shifting focus to services, with the sector now accounting for more than 70% of the city’s GDP. Shanghai’s strong retail, entertainment, food and beverage, professional services and real estate industries are a good snapshot of where many of China’s fastest growing cities are now heading.
International tourism is a big contributor to service imports, accounting for over half of the trade deficit. Those outbound travellers also represent the disparities between regions. For example, Shanghai residents make up less than 2% of China’s population but account for over 16% of travellers to Australasian destinations and many European ones. Nevertheless, Shanghai’s share will increasingly fall as travellers in smaller cities get easier access to visitor visas, gain confidence from travelling to nearby destinations and seek more exotic locations.
Some of the trends that China Skinny has observed in Shanghai travellers over the past few years are becoming increasingly relevant to Chinese travellers across many cities as these markets mature. This is reflected in the growth of independent travel and digital research and booking, and also the increasing focus on cuisine, unique experiences and personalised service.
The key to maximising tourism opportunities, like any service export, is understanding the customers’ needs and wants, and how best to reach them. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.