China’s Service Export Challenges and Future Potential: Benchmarking the USA

Abstract

China’s service trade deficit has increased sharply since 2010, raising questions about the competitiveness of its exports. One way to measure competitiveness is to compare China with its top competitors. In this paper, revealed comparative advantage (RCA) indices of China’s service exports are calculated based on the “forward linkage value added export” concept and compared with one of its top competitors – the US over the period from 2000 to 2014. The results show that only four of China’s service sectors RCAs, namely (1) construction, (2) wholesale and retail trade, (3) administration and food service activities, and (4) arts, entertainment and recreation, exceed those of the US while RCAs of other service sectors are lower. Furthermore, some Chinese services sector RCAs, especially those in the labor- and capital-intensive service industries, show a downward trend while the US has advantage in knowledge-intensive service industries. To compete successfully, China needs to upgrade its technology-rich service sectors and exports.

Keywords

• service trade
• comparison between china and us
• forward linkage value added export
• revealed comparative advantage
• export structure