Manufacturers up investments in services trade

When Loctek Ergonomic Technology Corp, a Ningbo, Zhejiang province-based office products manufacturer, launched its first self-owned container vessel with a capacity of 1,800 TEUs (twenty-foot equivalent units) last April, its goal was to reduce shipping costs and meet schedules on time.

Few could anticipate that this move would turn trade in services-related business into another major revenue driver for the company this year.

“Pushed by our clients’ demand for shipping services and soaring goods orders generated by cross-border e-commerce transitions, space on our container ships has always been fully booked and we have put two new overseas warehouses into operation in the United States and Germany in early July,” said Xiang Lehong, chairman of Loctek Ergonomic.

“Buying the container vessel has helped more Chinese exporters ship their products abroad,” said Xiang, adding that the company today is also providing overseas warehousing services to more than 700 exporters across various industries.

Loctek Ergonomic’s initiative is just an example to highlight how capable Chinese manufacturers transform their businesses to the next level and seek more growth points in trade in services.

In contrast to goods trade, trade in services refers to the sale and delivery of intangible services like transportation, tourism, telecommunications, warehousing, advertising, computing and accounting.

Despite facing rising trade protectionism and economic uncertainties, the growth of China’s trade in services will maintain an upward trajectory this year, with huge potential in foreign trade, consumption, logistics and tourism, experts and foreign business executives said.

Attracted by China’s growing foreign trade volume, US-based logistics provider FedEx launched two new flights to the United States from Qingdao, Shandong province, and Xiamen, Fujian province in June.

The company also plans to establish international gateway facilities at each location to enhance operational and clearance efficiency, in keeping with the increased business and trade demands of local customers.

“The launch of these two new cargo flights is a proactive move to meet the growing demand of China’s foreign trade and deepen cooperation with the local market,” said Koh Poh-Yian, vice-president for operations at FedEx China.

China’s trade in services totaled 3.02 trillion yuan ($415.66 billion) in the first five months of this year, up 16 percent year-on-year, data from the Ministry of Commerce showed.

In the meantime, the country’s imports and exports of travel services totaled 820 billion yuan, a jump of 48.4 percent on a yearly basis.

Upbeat about the Chinese market, EHL Hospitality Business School, a Swiss hospitality management university, started the seventh “HEMBA” program — an executive master of business administration in hospitality — with China Europe International Business School in Shanghai in June.

Achim Schmitt, dean of the Lausanne, Switzerland-based school, said the university will provide more tailor-made courses for Chinese students in the coming years.

Schmitt said that the hotel business in China has changed significantly in recent years. For example, luxury hotels are losing points with travelers in favor of specialized boutique hotels and fancy breakfasts. A number of hotels in Yunnan province and the Xizang autonomous region with beautiful landscapes have been the go-to options for a number of travelers.

Developing services related to immersive experiences is an effective way to attract more foreign tourists, as it allows them to explore these destinations from the comfort of their own homes, he added.

“People are eager to learn about the culture and scenic beauty of new areas. Local experiences are highly valued, including a taste of regional cuisine and cultural performances,” said Schmitt.

The huge market demand and growth opportunities in China, particularly in sectors like export-related manufacturing, travel, smart city development and e-commerce, are driving an increasing number of multinational companies to boost their investments in trade in services business within the country, said Nie Pingxiang, a researcher specializing in trade in services at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

To seek more growth points, China rolled out in April national and pilot free trade zone versions of negative lists for international trade in services, further liberalizing its service sector and creating a more open and fair business environment.

Nie said that lowering entry barriers for foreign investors in the services sector stimulates competition among domestic service providers. The competition drives businesses to enhance their services, boost efficiency and improve overall competitiveness.