Services and economic growth in China

Abstract

The service sector is playing an ever-increasing role in China’s economy (Li, 2012). Nevertheless, the service sector’s share in gross domestic product (GDP) is still lagging behind the manufacturing sector. The purpose of this study is to investigate the contribution that an expansion in the service sector may make to per capita economic growth in China. In addition, the study examines the spillover effects of growth in the service sector on growth in the manufacturing sector and vice versa. The model specification is based on previous studies of per capita economic growth (Fischer, 1993; Gani & Clemes, 2010). The framework consists of a single structural growth equation and a structural equation to measure the spillover effects of growth in the service sector, on manufacturing. Multiple regression analysis is used to analyse panel data from 1994 to 2011. Finally, the study presents its findings and policy implications.