On April 2, the 2024 CCID Forum hosted by the China Electronics and Information Industry Development Institute (CCID Research Institute) and the New Industrialization Research Center of the Ministry of Industry and Information Technology was held in Beijing. Huang Qifan, the former mayor of Chongqing, stressed in his keynote speech that China wants to become a manufacturing power, the key is to develop producer services. He called for China’s producer services to account for at least 30 percent of GDP by 2035, up from less than 20 percent now.

TESCOM 44-2261-241
Data show that the overall scale of China’s manufacturing industry has ranked first in the world for 14 consecutive years, but the problem of “big but not strong” is still prominent. In Huang Qifan’s view, this is not a problem with China’s manufacturing capacity, but the development of producer services behind the manufacturing industry is not in place, and the proportion of total factor productivity is not high.

There are three economic characteristics of today’s world, he says. First, all kinds of high-end manufactured goods, equipment, terminals, etc., are often about 50% of the added value of hardware manufacturing, and the other 50% is the added value of various services embedded in the hardware. For example, in addition to more than 1,000 parts in a mobile phone, the added value created by the operating system, software, built-in programs in the chip, and various patents often reaches 40% to 50%.

Second, the proportion of global trade in services is increasing. “Thirty or forty years ago, 5 percent of global trade was in services and 95 percent in goods. Today, 30 percent is trade in services.” Huang Qifan said.

TESCOM 44-2261-241 

Third, the more developed countries are, the higher the proportion of producer services in the GDP industrial system. In the United States, for example, industry accounts for 18 percent of GDP, agriculture for 2 percent, and services for 80 percent. Among the service industry, the life service industry accounts for about 35%, and the producer service industry is about 65%, which means that about half of the total GDP of the United States is directly related to the manufacturing industry.

TESCOM 44-2261-241
Huang Qifan further explained that the life service industry is mainly clothing, food, housing, transportation, education, health, culture, sports, elderly care, etc., while the producer service industry is directly related to the manufacturing industry 10 categories of services.

Producer services involve ten aspects of the industrial chain related to manufacturing. Including research and development of new technologies and new products in the industrial chain, inspection and testing of various parts and components in the industrial chain and market access, logistics and distribution of the global industrial chain, financial services in the industrial chain, green services in the industrial chain, digital technology empowerment of the whole industrial chain, product sales and raw material procurement of parts and components, patent protection and brand publicity in the industrial chain, policy and market information consultation. And product after-sales service.

At present, producer services account for an increasing proportion of the total GDP of all countries in the world, especially developed countries. It is estimated that these 10 producer services account for 50% of the total GDP of the United States and 40% of the total GDP of the European Union. The proportion of productive services in China’s total GDP is only 17%-18%, which is relatively low. The total proportion of service industry in China is about 54% now, and it may reach 60% in the future, of which 2/3 are life service industry, in contrast, producer service industry is not fully developed, and it needs to be paid attention to.

“Whoever controls the producer services of the industrial chain is the owner of the core value of the industrial chain.” Huang Qifan, for example, said, “Apple did not build a factory, no production line, did not take working capital to buy raw materials, did not engage in manufacturing, why Apple can make money, and the Chinese enterprises in the ‘fruit chain’ can obtain relatively high gross profit?” Because the ecology of the entire industrial chain is created by Apple, the research and development of the entire industrial chain is also done by Apple, and the ten kinds of producer services are in charge of Apple itself.

Producer services are often technology-intensive, talent-intensive, and have relatively high added value. “But most of our productive services are imported from abroad, and our own productive services can’t be exported to serve abroad, so we have a lot of ‘exports’ from abroad.” Huang Qifan stressed that “China’s producer service industry can use ‘opening up’ to force, focus on the development of service trade, and make good use of 22 pilot free trade zones.”