China’s Service Sector Is an Underutilized Driver of Economic Growth

China’s economic development over the last several decades has been remarkable amid rapid growth. We project growth will remain resilient at around 5 percent in 2024, despite the continued property sector adjustment.

At the same time, China has relied too much on investment as opposed to consumption. Diminishing productivity and an aging population risk restricting growth, which we expect to slow significantly in coming years, to around 3.3 percent in 2029. Addressing these challenges requires a comprehensive and balanced policy approach. 

Given these circumstances, the country’s service sector is an underexploited driver of growth—which was also recognized at the Third Plenum. Reallocating resources to services has helped boost productivity over the past two decades. And it can continue doing so in the years ahead if supportive reforms are implemented.

Expanding the service sector can also help put more people to work—especially young people, who are disproportionately employed in service sectors like technology and education. Moreover, since emissions are lower in services, expanding the sector would help China reach its climate goals more efficiently.

China does have significant further potential for expanding services, as we show in our latest annual review of the world’s second-largest economy. While the sector’s share of value-added to the economy has increased in recent years to just over 50 percent, it is still well below the average of about 75 percent for advanced economies.

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