The Impact of the Negative List Approach on the International Competitiveness of Service Industries

Su Limei, Peng Dongdong, Xie Wenli

Journal of Shanghai University of Finance and Economics Vol. 19, Issue 04, pp. 41 - 51 (2017)  DOI:10.16538/j.cnki.jsufe.2017.04.004

Abstract

In 2013, China formally tried out the negative list management mode in Shanghai Free Trade Zone. Based on this background, this paper makes an empirical study of the effect of the implementation of the negative list management mode on the international competitiveness of service industries in a country from a perspective of value added in trade, to provide references for future reform of foreign investment access system. It shows that compared with the countries without the negative list approach, the international competitiveness of service industries in countries with the negative list approach reduces, indicating that after the implementation of the negative list approach, foreign enterprises entering a host country can crowd out domestic value-added share of the host country’s services exports by their competitive advantages, and weaken the competitive advantage of domestic enterprises in the host country in domestic exports. Moreover, the differentiated analysis results show that the negative impact of negative list on the international competitiveness of service industries is likely to be more significant for the host countries with lower GDP, worse law environment and for countries applying a negative list for partners with higher GDP, and the international competitiveness traditional services suffer more from the negative list. As a result, this paper concludes that it is necessary for China to reform the internal legal system during the international investment liberalization process, which means we should improve the legislation about foreign investment in service industry to make up for the negative impact of the negative list approach. And China should take the difference in both sectors and regions into consideration to optimize the degree and order of opening-up, and make sure that China could promote the service competitiveness effectively during the international investment liberalization process.

Keywords

negative list; services; international competitiveness; management mode