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China is reaching its tipping point

Updated: 2013-10-21 01:03
By ALFRED ROMANN in Hong Kong ( China Daily)

Big change is coming to the nation's way of doing business this century

China is reaching its tipping point

Nicole Kidman greets fans at the opening ceremony of the Oriental Movie Metropolis in Qingdao, Shandong province, on Sept 22. The Chinese government is keen to expand the service sector and reduce reliance on manufacturing for economic growth. AFP

The weekend of Sept 21 was a busy one in Qingdao, in China's eastern Shandong province. The seaside town known for its beaches, beer and fish hosted some of the most famous actors in the world.

Leonardo DiCaprio and Nicole Kidman were there. So were Ewan McGregor, John Travolta, Zhang Ziyi, Jet Li and Tony Leung. They were mostly for decoration. The star of the show was really Wang Jianlin, who has become the richest man in China thanks to his Dalian Wanda group, a real estate and entertainment conglomerate.

Wang brought these celebrities to the party to announce an $8 billion mega studio and theme park in this city. If it comes to pass, the tentatively named Qingdao Oriental Movie Metropolis and its 100 film studios and theme park will add significantly to the service column in China's GDP calculation.

The government is keen to expand the service sector in the economy because it would mean less reliance on manufacturing for growth. At the same time, more expenditure on this sector would signal that the Chinese have stepped up to the plate.

"The service sector is not mature compared with the industrial sector," says Zhao Hong, a researcher at the East Asian Institute of the National University of Singapore. "It is still small but has potential because China is adjusting its economic structure."

This year could be a turning point in the development of the Chinese economy. For the first time in recent history, the service sector could overtake industry in its contribution to the economy. In 2012, services accounted for 44.6 percent of China's GDP while industry was responsible for 45.3 percent. Numbers for 2013 are not out yet, but services have been growing faster than industrial production.

GDP is made up of the value of all goods and services produced in an economy. In simple terms, it is measured by adding consumption, investment, government purchases and net exports. The consumption category is further divided into goods and services.

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