Services trade performance in China: An empirical analysis / Dong Hanghang

• Main Author: Dong , Hanghang
• Format: Thesis
• Published: 2023
• Subjects: HF Commerce
• Online Access: http://studentsrepo.um.edu.my/15301/1/Dong_Hanghang.pdf; http://studentsrepo.um.edu.my/15301/2/Dong_Hanghang.pdf; http://studentsrepo.um.edu.my/15301/
• Institution: Universiti Malaya

Theoretical and empirical analyses have proved that the services industry plays a crucial role in China’s economic growth and international trade. However, China exports far fewer services than its imports, which has led to weak competitiveness in its services exports. This situation has resulted in a lack of impetus for the sustained development of trade in services. This study has examined the competitiveness of the services trade by calculating the revealed comparative advantage of China’s service sectors based on the value-added exports of the forward-linkage method from 2000 to 2014. The results showed that China’s service sub-sectors showed a comparative disadvantage compared with other selected countries. Fortunately, the value of the revealed comparative advantage has gradually increased in recent years. This study used the augmented gravity model, using 42 trading partners, to examine the determinants of China’s services trade from 2000 to 2014 by adopting the Poisson Pseudo Maximum Likelihood High- Dimensional Fixed Effect. The empirical results showed that the economic sizes of China and its trading partners, the sharing of common borders, China’s fixed telephone subscriptions, the exchange rate, and the perception of lower corruption in partner countries positively contributed to the level of services trade between China and its counterparts. In contrast, trade restrictiveness and the distances between the capitals of China and its counterparts were negatively associated with China’s services trade. The greater availability and adoption of information and communications technology in China’s partner countries have negatively (positively) affected China’s services exports (imports). Fortunately, the benchmark regression results were strongly robust when using alternative methods. Besides using qualitative analysis, this study analysed how China’s services sector has contributed to China’s overall trade performance and how government policies and the COVID-19 pandemic have influenced China’s services. It was found that China is gradually opening up its service sectors by relaxing some restrictions on market access. Additionally, knowledge-intensive services are gradually starting to play a critical role in China’s economic growth. The COVID-19 pandemic has badly affected servicesector foreign direct investment, but the effect is only expected to last for a short while. Finally, this study has highlighted that China should actively develop more service trade cooperation with countries together with the "Belt and Road" Initiative. It also needs to liberalise the services trade further and relax restrictions on the movement of people, especially in the fields of technology, tourism, overseas study, business, and culture. Last, China should focus on scientific and technological research and development and increase investment in scientific and technological innovation.