Service Industry: Blowing the horn for the breakout of Economy

Source: Wenhui Bao News, September 24th 2008

Can the Service Industry blow the horn for the breakout of Chinese economy? At the International Seminar— "the Main Characteristics of the Current Development of China's Service Industry and relevant Policy Guidance" in Shanghai held yesterday morning, the participating experts from both China and France unanimously showed their concern for topics including "promote the development of Service Industry and Service Outsourcing Industry", "Change China's current disadvantaged position in international labor division so as to solve the problems occurred in Chinese economy of this year", etc.

Huge market potentials for Service Outsourcing

"Strategically, developing the Service Industry is of great significance to the State," said Guo Huaiying, a Researcher from the Research Institute of Industrial Economy of National Development and Reform Commission (NDRC). Despite strong economic growth momentum as seen in the past few years, China is still at the endmost point of the value chain of International Division of Labor (a disadvantaged position). If any unfavorable changes happened to international economy, China would suffer huge losses. At the moment when China’s industrial development slows down and profit margin falls, it is the right time to actively promote the development of the Service Industry and especially the development of Service Outsourcing, so as to improve the situation where we are now. 

Service Outsourcing, simply speaking, is about entrusting the non-core business of the enterprises to a specialized company, so that enterprises could focus on their core business, reduce the operating costs and enhance efficiency. Although the scale of the current service outsourcing market in China is relatively small, it is developing in a high speed with 19% increasing rate last year. The emergence of massive outsourcing services will promote the birth of much productive business. To some extent, the level of service outsourcing has decisive effect on the level of the service industry.

"According to the research we did, the potential market value of the service outsourcing in China is huge, at least to reach 400 billion RMB." Christophe SOLAS, CEO of Sodexo Greater China told the reporters. Except for the advantages in cost and talents, China's current service outsourcing market has great possibility to be further segmented. All these factors will enhance China's ability of providing large amount of good-quality outsourcing services for the international market, as well as creating new growth point for China's economic development.
Service Industry adapted to small and medium-sized enterprises.

Service Outsourcing Adapted to Small & Medium-sized enterprises

Mr. Christian Breuil, Director of BUC Education Center, told reporters, apart from promoting the economic development, the social effect of Service Industry is far out of our imagination. In addition to paying attention to the high-tech and modern service industry, we should also keep an eye upon traditional services with profound social effect. Among the newly increased work posts in France this year, one in every three is about seeming-to-be-unattractive nursing services, house maintenance, plumber job, electrician, etc.

Mr. Christian Breuil said, with the increasing severity of the global problems such as aging tendency of population, increasing birth rate, speeding urbanization process, prolonged working time etc., the populace's demand for family services has kept rising. However, negative elements such as contempt for family services providers in traditional concept and insufficient support from government are preventing family services' development. In 2005, French government passed the bill to establish "National Family Services Administrative Bureau" in France; through signing target contracts, standardizing trainings, structuring this industry, etc, some fruitful results have been achieved in promoting the development of the family services industry.

"Change your mind, and you will find new development direction." Mr. DU Ping, Director of the Training Centre of NDRC told reporters. While manufacturing industry and many small and medium-sized enterprises are going through stagnated winter, it might be a right time to transfer to the Service Industry. Although many traditional service industries seem not as famous and profitable as the manufacturing industries, they are equipped with advantages such as small investment, relatively low requirement for staff and technology, etc. which is just adapted to the development needs of the small and medium-sized enterprises. Moreover, in Service Industry, the service providers are directly faced with the consumers, which endowed the service enterprises with the ability to quickly respond to market movement and with more flexibility in adjusting development direction. 

With the increasing importance of the productive service industry (the systematic service industry directly related with manufacturing industry) in international competitions, the economic development of our country calls for the birth of relevant enterprises which meet with the market demands. As put forward in the draft of the 11th Five-year Plan Outline, "because of the underdevelopment of the productive service industry, the transaction cost in our country is 10% higher than that in foreign countries, which has become a crucial factor which compromises our competitive strength". "Our small and medium-sized enterprises should make more contributions in this field, which might be the only development direction for them after China enters the intermediate and late stage of industrialization." Mr. DU Ping said.