China pivots to services

China’s top leadership used a national services conference in Beijing on April 8 to say the next leg of growth should come from demand, technology, and services instead of the old property-and-construction playbook. Xi Jinping called for more “China service” brands and for business services to move higher up the value chain. (reuters.com) (gov.cn) That is a big change in emphasis for an economy that spent years leaning on apartment building, factory investment, and exports of physical goods. China’s new five-year plan says household consumption is about 40 percent of gross domestic product and should rise “significantly” over 2026 to 2030. (reuters.com 1) (reuters.com 2) Services already make up the biggest slice of China’s economy, but Beijing wants that slice to do more of the lifting. China’s statistics bureau said the service sector accounted for 57.7 percent of gross domestic product in 2025 and grew 5.4 percent, faster than overall growth of 5.0 percent. (stats.gov.cn) (gov.cn) When Chinese officials say “services,” they do not just mean restaurants, hotels, and haircuts. They also mean design, research and development, software, engineering, logistics, data work, and other business services that travel with high-end manufacturing like invisible cargo. (gov.cn) (businesstimes.com.sg) That export angle is already showing up in the numbers. The Business Times, citing World Trade Organization data, said China is now the world’s sixth-largest exporter of digitally delivered services, up from seventeenth in 2005, and earned about 100 billion United States dollars from information and communication technology services in 2024. (businesstimes.com.sg) Some of those service exports are now larger than old-school goods categories that once defined “Made in China.” The same report said China’s 2024 exports of “other business services” reached 113 billion United States dollars, above steel at 71 billion dollars and apparel at 85 billion dollars, while construction services exports hit 34 billion dollars, above glass products at 25.5 billion dollars. (businesstimes.com.sg) The problem is that China is trying to build this new engine while the old one is still breaking down. The 2025 statistical communique said prices for existing homes fell year over year in all 70 large and medium cities it tracks in December, and prices for new homes fell in 65 of the 70 cities. (stats.gov.cn) That housing slump hits consumption from two directions at once. Apartments were the main store of wealth for many Chinese households, so falling home values make families feel poorer, and unfinished or weak property projects also weigh on banks, local governments, and developers that used to keep construction humming. (macrobusiness.com.au) (reuters.com) Markets are treating that property pain as a live problem, not old news. Morgan Stanley has been cutting target prices on mainland and Hong Kong-listed property names, and one recent note carried the view that the sector would stay under pressure into the second quarter. (news.futunn.com 1) (news.futunn.com 2) So Beijing is trying to swap out the economy’s engine without stopping the car. The bet is that better consumer services at home and more knowledge-heavy services sold abroad can replace at least part of what property and heavy industry used to provide, but that only works if households start spending more freely than they have in the last decade. (reuters.com) (businesstimes.com.sg)