No­belist: Ser­vice sec­tors key to “Made in China 2025”

China Daily (Canada) - - SHANGHAI - By ZHU LIXIN and MA CHENGUANG in He­fei


China’s ser­vice sec­tors need to re­ceive greater sup­port if the “Made in China 2025” strat­egy is to suc­ceed, ac­cord­ing to Christo­pher A Pis­sarides, the 2010 No­bel Prize win­ner in eco­nom­ics.

The strat­egy, which is fo­cused on the man­u­fac­tur­ing sec­tor, was un­veiled by China’s State Coun­cil in May 2015 and it is the first 10-year ac­tion plan de­signed to up­grade China’s ca­pa­bil­i­ties so that it can be­come a world man­u­fac­tur­ing power by 2025.

Last week, dur­ing a lec­ture at the Univer­sity of Science and Tech­nol­ogy of China in He­fei, cap­i­tal of East China’s An­hui prov­ince, Pis­sarides said that the ser­vice sec­tors will be vi­tal in ad­dress­ing the con­se­quences that will arise from the strat­egy.

“Though it is grow­ing, China’s in­dus­trial pro­duc­tiv­ity is still very low. The ‘ Made in China 2025’ strat­egy, which em­pha­sizes on au­to­ma­tion, will help to in­crease the pro­duc­tiv­ity sub­stan­tially, but this will re­sult in nu­mer­ous mid-level work­ers, es­pe­cially those from the man­u­fac­tur­ing sec­tors, los­ing their jobs and China has to be pre­pared for it,” said Pis­sarides.

China has been fac­ing press­ing em­ploy­ment is­sues in re­cent years as an in­creas­ing num­ber of man­u­fac­tur­ers plan to re­place hu­man work­ers with in­dus­trial ro­bots. A re­cent re­port by Eco­nomic Daily pre­dicted that the num­ber of in­dus­trial ro­bots in China has surged by 36.6 per­cent from the pre­vi­ous year to 75,000 in 2015.

Pis­sarides added that post-2025 China, which will be home to a small but dy­namic man­u­fac­tur­ing sec­tor that will drive pro­duc­tiv­ity growth and ex­ports, will need to re­spond to this prob­lem by hav­ing a much larger ser­vice sec­tor that can pro­vide jobs.

“The strat­egy needs to be ac­com­pa­nied by other sup­port­ing poli­cies that will gen­er­ate em­ploy­ment. About 90 per­cent of the coun­try’s em­ploy­ment will have to be in ser­vice sec­tors which can­not be au­to­mated,” said Pis­sarides.

As part of the strat­egy, au­thor­i­ties have also vowed to pro­mote ser­vice-ori­ented man­u­fac­tur­ing and man­u­fac­tur­ing-re­lated ser­vice in­dus­tries, and Pis­sarides be­lieves that the ser­vice sec­tors will take on broader scopes. He sug­gested that China will need to re­form its econ­omy in or­der to en­cour­age more pri­vate sec­tor devel­op­ment, es­pe­cially in the ser­vices in­dus­try.

“The main sec­tors that will ben­e­fit are the la­bor-in­ten­sive ones such as health­care, ed­u­ca­tion, per­sonal ser­vices, house­hold ser­vices, real estate man­age­ment and the hos­pi­tal­ity in­dus­try,” said Pis­sarides, adding that these par­tic­u­lar sec­tors in China are not do­ing very well.

“Most of the com­pa­nies in these ser­vice sec­tors are small and medi­um­sized en­ter­prises. In or­der for them to per­form, finance needs to be lib­er­al­ized and the fo­cus on state en­ter­prises should be re­laxed. The coun­try will need a good leg­isla­tive frame­work and good tax in­cen­tives for SMEs in the ser­vice sec­tors, since their prof­its mar­gins are very low,” said the econ­o­mist.

“There is no bet­ter time to do that than the present, since the process is inevitable. The ear­lier they start the cam­paign, the bet­ter devel­op­ment chances they will have in the fu­ture,” he added.

Pis­sarides, to­gether with Peter A Di­a­mond and Dale Mortensen, won the No­bel Prize in 2010 for con­tri­bu­tions to the the­ory of search fric­tion and macroe­co­nomics. He is a pro­fes­sor at the Lon­don School of Eco­nom­ics and Po­lit­i­cal Science, spe­cial­iz­ing in the macroe­co­nomics of la­bor mar­kets, struc­tural change and eco­nomic growth.


Christo­pher A Pis­sarides

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