SOURCE: China Business Forum

January 23, 2007 11:15 ET

Services Trade With China Boosts US Jobs, Payments

Study Shows Major Impact on Both Economies From Fast-Growing Sector

WASHINGTON, DC -- (MARKET WIRE) -- January 23, 2007 -- The dramatic expansion of trade and investment in services between China and the United States has benefited both economies substantially and will continue to do so for the foreseeable future, according to a new study by Oxford Economics. The study shows that the US could add as many as 240,000 new, high-paying service industry jobs by 2015 as a result of the growing trade with China, in which the United States has a balance of payments advantage.

The study, "The Prospects for US-China Services Trade and Investment," was released today by the China Business Forum, the educational and research arm of the US-China Business Council (USCBC).

"This study shows that the future benefits are clearly significant for both the US and Chinese economies if China continues to open its service sector to foreign providers," said John Frisbie, president of the USCBC. "The US is the world's leading service economy and this is an important area for growth."

Trade and foreign investment in China's service sector already benefit both economies, according to the study. The United States has a services trade surplus with China, worth $2.6 billion in 2005. Net US service sector exports and income of service sector investments to China, worth $3.1 billion in 2005, currently support 37,000 jobs in high-productivity sectors of the US economy.

If the pace and scope of China's service sector reform accelerate, the US services trade surplus with China could increase to around $60 billion by 2015, and extra income from US service-related investments in China would be worth $7 billion. The average US household would be better off by about $500 per year in 2010 as a result of this growth in services trade with China. By 2015, the US benefits would include the 240,000 new service sector jobs.

In the long run, US service sector exports to China could reach between 1.5 percent and 3.5 percent of US GDP. The US service sector trade surplus with China could be worth around 1 percent of US GDP, while inflows of profits from US service sector investments in China could contribute a further 0.5 percent of GDP to the US current account of the balance of payments.

"Our research shows that implementing China's World Trade Organization commitments is an essential first step to maximizing the advantages for both economies of service sector trade and investment. If China increases the pace and scope of reform in the sector, the benefits will be even more substantial and long-lasting," said Erik Britton, director of Economics at Oxford Economics and lead author of the study.

If the impediments to service sector growth in China are fully removed, the average Chinese household would be better off by $300 to $400, or RMB 2,300 to RMB 3,100, per year by 2015. The benefit would amount to an additional $138 billion in GDP (in 2006 prices). In this scenario, the growth in service sector trade and investment will add up to 7 million jobs in China in relatively high-paying, high-productivity service industries by 2015.

"As China's economy shifts toward one based on services, consumption -- and possibly imports -- may rise. This would provide even more opportunities to US companies selling to China," USCBC President Frisbie said.

About the China Business Forum and the USCBC

The China Business Forum, Inc. (www.chinabusinessforum.org) was established by the US-China Business Council (USCBC, www.uschina.org) to promote broad-based policy discussion and greater understanding in both China and the United States of the economic systems and business methods of each country and of the role of commerce in the overall relationship between the United States and China.

The USCBC is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory, and advocacy services, along with events, to nearly 250 US corporations operating within the United States and throughout Asia.

About Oxford Economics

Oxford Economics (www.oef.com) is one of the world's leading providers of economic forecasting, analysis, modeling, and advisory services. Oxford Economics supplies a range of "off-the-shelf" products and services in addition to customized economic consultancy services, with staff in London, Oxford, and Philadelphia.

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