Service sector powers China's new engine of economic growth

The recently concluded Qingming Festival holiday offered a vivid snapshot of the vitality of China's service sector.

From immersive "tea-picking study tours" to Han- and Tang-style costume photography amid blooming flowers in scenic areas, and even Beijing's smart home-cleaning services delivered by teams combining human workers and robots, consumption patterns are clearly shifting. As living standards rise alongside China's modernization drive, households are moving away from "buying more goods" towards "seeking better services and richer experiences."

From everyday scenarios to growth engine

The service sector not only holds vast consumption potential as a daily necessity but also generates powerful productive forces.

The Formula One Chinese Grand Prix held in Shanghai in March is a case in point. Over three days, more than 230,000 spectators attended, generating 190 million yuan (roughly $28 million) in ticket revenue alone, a 35% increase from last year.

Behind the spectacle lies a complex ecosystem of services, including R&D design, finance and insurance, logistics, event management and cloud data services. Technologies refined on the racetrack – from aerodynamics to lightweight materials – are feeding back into the civilian automotive industry, accelerating manufacturing upgrades.

If consumer services are designed to serve people, then producer services – spanning areas such as R&D, finance and logistics – primarily serve businesses, forming indispensable pillars of the modern economy.

The lion's share

The service sector has become the largest component of China's national economy. Official data showed that in 2025, the sector's value added surpassed 80 trillion yuan for the first time, accounting for 57.7% of GDP and maintaining its position as "half of the economy" for 11 consecutive years. It contributed 61.4% to overall economic growth, accounted for nearly half of household spending and absorbed around 50% of total employment.

"China has entered a stage of development led by the service economy. The service sector has become a core pillar in driving growth, creating jobs and safeguarding people's livelihoods," Zhang Xiaolan, a researcher with the National Development and Reform Commission, told the Economic Information Daily.

Despite this progress, challenges remain. Compared with developed economies, China still lags in the share, quality and international competitiveness of its service sector – particularly in high-end supply and professional specialization. As such, further improvements are needed to better meet the demands of industrial upgrading and people's aspirations for a better life.

"Enhancing the capacity and quality of the service sector is a critical step in shifting China's economy from scale-driven expansion to efficiency- and quality-oriented growth," Zhang said.

Rising demand meets policy support

Looking ahead, both demand-side shifts and policy support are aligning to unlock new growth potential.

Household consumption is moving from "whether there is enough" to "whether it is good enough," with demand surging in areas such as eldercare, childcare, healthcare and tourism. At the same time, accelerating industrial transformation – driven by digitalization and green development – is generating strong demand for producer services, including R&D, modern logistics and supply chain finance.

In addition, expanding service consumption to boost domestic demand has become a key pathway to stabilizing economic growth amid rising global uncertainty.

Against this backdrop, China is stepping up policy support. From the Government Work Report's emphasis on expanding investment in key service sectors, to State Council directives on widening market access, and the latest national conference calling for a systematic push to enhance capacity and quality, a clearer and more coherent top-level design is taking shape.

Efforts will focus on promoting greater specialization and higher value added in producer services, improving the quality, diversity and accessibility of consumer services and fostering more "China Services" brands.

Concrete measures are already underway. The Ministry of Human Resources and Social Security has launched pilot programs to integrate human resources services with manufacturing, while Guangdong Province is promoting deeper integration of technology and finance to support innovation-driven enterprises. Initiatives such as building "15-minute community life circles" are also bringing high-quality elderly care, childcare and catering services closer to residents.

A new calling card for foreign investment

The service sector has also become a key entry point for China's high-level opening up. In recent years, China has advanced service trade development, improved inbound tourism policies, expanded pilot programs for service sector opening and promoted the orderly liberalization of sectors such as telecommunications, healthcare and education.

Major platforms such as the China International Fair for Trade in Services have boosted global cooperation, while pilot zones for expanding service sector opening have been extended to 20 regions across the country. In 2025, the service sector accounted for around 70% of China's utilized foreign investment, according to the Ministry of Commerce. The country also recorded over 150 million inbound tourist visits, with spending exceeding $130 billion, making travel services the largest segment of service trade.

"Services are now China's calling card for foreign investment. High-end logistics, R&D services, digital trade – multinationals see opportunity and they're investing for the long term," Zhao Zhongxiu, president of the University of International Business and Economics, told CGTN.

As policy measures continue to roll out, the service sector is expected to enter a new phase of rapid expansion. Analysts predict strong growth in areas such as software and information services, with annual growth rates around 12%, while the market for AI-powered services could exceed 800 billion yuan.