A fleet of food delivery workers wind their way down a road in Shanghai. [Photo provided to China Daily]

Figures from NBS show it is a crucial part of keeping economy on track

BEIJING－China's service sector has become crucial in helping to drive the country's economy.

Chi Fulin, head of the influential China Institute for Reform and Development, highlighted the role it is playing as data showed growth held steady in the first five months of the year.

"The shifts show the Chinese economy is becoming dominated by the service sector," Chi said. "Under downward pressures, industrial upgrades are vital for sustaining economic growth and avoiding the middle-income trap."

Figures released this week showed that key service indicators rose rapidly, suggesting that structural upgrades have cushioned long-term downward pressures on the economy.

"Led by supply-side structural reform and innovation-driven strategy, the national economy continued to grow steadily in May with increasing coordination of development," Liu Aihua, spokeswoman of the National Bureau of Statistics, said on Wednesday.

The NBS reported that May's growth of 8.1 percent for the service sector helped extend the rally since the beginning of the year.

Data confirmed it accounted for more than half of the economy last year.

Figures released by the NBS also illustrated that the trend is continuing as the service sector takes a bigger slice of GDP in 60 percent of provincial-level regions.

One of the latest provinces to back this up was Shandong in eastern China.

In the first quarter, the local service sector's contribution to GDP climbed 1.5 percentage points to 51.1 percent, according to the provincial government.

Seven of the top 10 provinces with the highest GDP have seen similar shifts.

More profound changes are happening in developed regions.

In the eastern metropolitan area of Shanghai, the proportion of the service sector contribution to GDP reached 50.8 percent in 2004.

Local investment growth rate eased to 6.5 percent in 2014, lower than the 7 percent regional growth.

But the city's GDP increased to 6.8 percent last year, exceeding the national growth rate for the first time in eight years, fueled by the service sector's contribution of more than 70 percent.

"The change is a milestone in the Chinese economy," said Li Yang, director of the National Institution for Finance and Development under the Chinese Academy of Social Sciences or CASS.

"It showed Shanghai got over the investment-driven growth model which China has relied on for years," Li added.

Still, compared to developed countries such as the United States, the service sector's contribution to GDP in China remains low.

But it has huge growth potential as it becomes increasingly attractive to investors.

This week's data showed that investment in the service industry jumped 11.6 percent year-on-year in the first five months. This was 3 percentage points higher than overall investment growth.

Last year, investment in the service sector surged 10.9 percent compared to the same period in 2015.

Again, this outpaced the 3.5 percent increase in secondary industries, according to official data.

A CASS research report confirmed the service sector will account for 72 percent of China's total industrial output in 2030. It will also provide 56 percent of the country's new job vacancies in that year.

Other highly-watched economic figures released this week, including retail sales, fixed-asset investment and housing sales, also underlined the economy's resilience.

Boosted by strong online figures, retail sales increased 10.7 percent year-on-year in May, signaling continued consumption strength.

But growth in the property development investment sector slowed for the first time since November as the market showed signs of cooling after the government's move to deflate potential asset bubbles.

Finally, the International Monetary Fund has raised its forecast for China's economic growth in 2017 to 6.7 percent. This was an increase from its April forecast of 6.6 percent.

"Backed up by structural upgrades and an improving development environment, we are confident of continued growth in the future," an IMF spokeswoman said.