Is the Chinese Economy Moving in the Direction of Tertiarization?

Abstract

AbstractDrawing upon output, employment, consumption and trade data, this article examines whether there is an economic tertiarization trend in China 's economy and evaluates the common factors driving current trends. It shows that the tertiarization trend is evident for the overall economy and most regions in terms of the service nominal value‐added ratio and service employment and consumption. However, the tertiarization trend is not significant in terms of the service real value‐added ratio, and there is even some concurrent “detertiarization” because of the decreasing proportion of services in imports and exports. Indeed, China's tertiarization trend is far behind its industrialization trend. The rise in the relative prices of services explains the rising proportion of household service consumption expenditure and further illuminates why the service real value‐added ratio has not grown. The main cause for the growing percentage of service employment is the lag in service labor productivity growth in interaction with the price inelasticity of service demand. “Cost disease” has appeared in service consumption.