China is facing some challenges in its drive to become a major trader in services, officials and experts said.

"One major challenge is that production costs are rising all over the world. In addition, some services sectors cost a lot and are not environmentally friendly," Lyu Jijian, deputy director of the department of trade in services and commercial services at the Ministry of Commerce, told China Daily.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank for the ministry, said that China's trade in services is still in a weak position compared with developed economies.

Trade in services account for about 20 percent of the world's total trade, but China's $470 billion trade in services in 2012 accounted for only 10.8 percent of the country's total foreign trade, Huo said.

In addition, the country runs a $89.8 billion deficit in trade in services, larger than any other nation, Huo said.

Lyu said tourism and transport services sectors contributed most to the deficits.

"Chinese people are now fond of going abroad for tourism and shopping and the momentum will not change in the near future. But it may not be a bad thing as it shows the enhanced income and livelihood of Chinese people," Lyu said.

In 2012, China's trade in services in the tourism sector surged 25.6 percent year-on-year to $150 billion, the largest share of the country's trade in services. Transport services rose 7.5 percent year-on-year to $124.77 billion, making it the second-largest trade in services sector, according to the ministry.

Li Gang, a researcher from the Chinese Academy of International Trade and Economic Cooperation, said that six services sectors, such as telecoms, insurance and finance, accounted for less than 7 percent of China's services exports last year while more than 93 percent of services exports come from other sectors including transport, tourism and construction.

In addition, contributions from transport, tourism, insurance, patent, consultation and others made up 94.86 percent of China's total services imports, suggesting weak competitiveness in China's trade in services, Li said.

Huo added that China's promotion of trade in services is not enough compared with that in the West.

The government should give more policy support to trade in services just as it did in the goods trade, Huo said.

Premier Li Keqiang said on Wednesday that China will expand its trade in services as well encourage developed enterprises to go abroad.

He called for the liberalization of trade in services and a fight against protectionism while urging developed economies to play an active role in opening up services sectors.

Li said that China's services sector is less developed compared with the rest of the economy with supply shortages in many services sectors, for which systematic as well as mechanical obstacles are to blame. The government will take a series of measures, including value added tax reform, to improve the environment for services development.

The government will also devote more efforts to liberalize and facilitate trade in services, including drafting policies and improving regulations, while welcoming foreign investment into the emerging sector, the premier added.

(China DailyUSA 05/31/2013 page7)