Services and economic growth in China: an empirical analysis

This is the first study that empirically investigates the contribution that an expansion in China's emerging services sector may make to China's per capita economic growth. In addition, the study examines the spillover effects of growth in China's services sector on growth in the manufacturing sector and vice versa. The framework consists of a single structural growth equation and a simultaneous equation to measure the spillover effects. Multiple regression analysis is used to analyse data from 1994 to 2011. The empirical results indicate that an increase in exports and government spending will positively affect value-added in the services sector. The findings also indicate that the services sector has a positive influence on the growth of per capita GDP. Finally, as published studies on the contribution of the services sector to China's per capita growth are sparse, the study presents policy implications.