The Development of Service Economy by Zhenhua Zhou

Author:Zhenhua Zhou
Language: eng
Format: epub
Publisher: Springer Singapore, Singapore

8.3.3 The Downgrading Effect of Industrial Structure

Dominated by the development mode of non-balanced investment drive, the rapid economic growth in China will be promoted in a certain period, or some advanced structural adjustment will brought about, but for the development of service industry and economic servitization, the downgrading effect will be reflected in industrial structure to some degree. Even if the export-oriented strategy brings about the new changes in investment drive modes, especially, the interaction between industrialization and urbanization, the connection between manufacturing industry and service industry and the development of human resources, which is beneficial to the development of service economy, its serious restraint on the development of service economy will be formed to a greater degree and the downgrading effect on industrial structure will be revealed.

The large-scale entry of foreign investments characterized by international original equipment manufacturers (OEMs), the investments in the heavy chemical industry are encouraged all over the country, which makes the investments in service industry decrease a bit. During 2003 and 2010, though the investment volume in fixed assets in service industry accounted for more 50 % of the total investment in fixed assets in every year, compared with the beginning of the period, the investments in service industry decreased by −6.7 % in this period. It is noticeable that, among the investments in service industry, the investments in real estates accounted for more than 40 %, and the investments in other service sectors were not high at all. But the investment elasticity in real estates is only 0.27, which is lower than the investment elasticity, 0.32, in the whole service industry. This means that every increase of 1 % in service industry will promote the average growth by 0.32 % in the added-value of service industry. The financial industry with a bigger investment elasticity, 0.41, and the other service industries, 0.34, accounted for only 0.3 and 0.7 % respectively (Xian et al. 2012). At the same time, with the large-scale investments in manufacturing projects, the employment in secondary industry will increase obviously, which forms the occupying effect on the employment in service industry. According to the concerned statistics, during 2005 and 2010, the employment in service industry increased 36.08 million people, by 15.87 %; the employment in secondary industry increased 51.33 million people, by 30.72 %, which was 15 % higher than that of service industry. Before 2005, the employment output elasticity in service industry is clearly higher than that of secondary industry, but it lost its dominative position since 2005.

Most of FDI is distributed to the construction of production bases in China to have processing trade, which locked the low-end production on the value chains, combined and controlled the resource factors such as knowledge, technology and brand embedded on the value chains, thus the basic pattern of two heads out including R&D design and marketing was formed. To a greater degree, the industrial relationship was cut off between producer service industry and manufacturing industry which were based on spaces. This was reflected by

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