Although the service industry in China booms up relatively late, it shows a strong momentum of growth recently; China’s service industry accounted for more than 40% of GDP in 2000. As most developed countries including America and Japan have experienced, China’s industrial structure is now showing a tendency of the transformation from " industrial-based economy” to " service-oriented economy”, facing the challenge of industrial hollowing-out. Will the development of the service industry damage our country’s exports? Data shows a high degree of consistency between the expansion of China’s exports and the development of service industry from the trend perspective, even after the service industry accounted for more than 40% of GDP. Therefore, the relationship between the development of service industry, its concomitant issue of industrial hollowing-out and export may be complicated and deserves further discussion. Especially under the background of increasing threat of industrial transfer represented by processing trade, this research has strong practical significance. This paper also has obvious policy implications for China’s trade development strategy and the direction of national economic transformation & adjustment. Based on achievements of existing researches, this paper attempts to make the marginal contribution in the following two aspects: first of all, on the basis of data concerning the development of service industry at city-level, we examine its impact on the export of manufacturing enterprises and depict and verify its influence mechanism at the micro level, which is a useful supplement to the existing theory; besides, based on the overall development of local service industry and taking the impact of the processing trade into account, this paper can intuitively reflect the impact of service industry development on processing trade enterprises and identify the possible trend of industrial transfer, providing empirical evidence for the impact of tertiarization and being of practical significance to China’s industrial policy formulation and foreign trade transformation strategy. Our research shows that: on the whole, the development of urban service industry not only enhances the export probability of enterprises, but also promotes the expansion of enterprises’ export volume. The development of urban service industry promotes the export of enterprises mainly through " division-of-labor effect” and restrains the export of enterprises mainly through " wage-premium effect”. We also obtain the following conclusions by expanding the research: firstly, the development of urban service industry benefits the export of persistent exporters, longer-existing firms and large-scale enterprises, but does damage the export of foreign-funded firms, capital-intensive firms and firms with high level of productivity; secondly, the export of processing trade enterprises is restrained by the development level of urban service industry; thirdly, after excluding the processing trade enterprises, the export of capital-intensive enterprises and high productivity enterprises can also benefit from the development of urban service industry. Based on our conclusion, the following three policy implications can be obtained. Firstly, we should take a correct view of the development of service industry and the threat of industrial hollowing-out. The tertiarization helps to improve the overall level of the national economy and bring about higher efficiency. Secondly, as the transition period of " service-oriented economy” approaches, the governments should pay more attention to new industries and promote the timely replacement of the old industries by the new industries, instead of blindly supporting the old industries. Thirdly, in order to promote the transformation and upgrading of local processing trade enterprises, we should seek a linkage mechanism between the development of service industry and the transformation and upgrading of processing trade enterprises. On the one hand, our governments can try to promote the servitization process of manufacturing industry; on the other hand, we should promote the service industry to actively embed the production chain and reduce transaction costs of processing trade enterprises.
City Service Industry Development, Enterprise Export and Transformation of Processing Trade
Journal of Finance and Economics Vol. 44, Issue 03, pp. 97 - 111 (2018) DOI:10.16538/j.cnki.jfe.2018.03.008
 Gu N H, Bi D D, Ren W B. Relationship between producer services’ development and manufacturing’s competence in China during transition period——An empirical research based on panel data[J]. China Industrial Economics, 2006, (9): 14-21. (In Chinese)
 Jiang X J. Growth of service industries: true meaning, multiple influences and trend[J]. Economic Research Journal,2011, (4): 4-14. (In Chinese)
 Liu B, Wang N J. Input servitization of manufacturing and dual margins of firms’ export——An empirical study based on the data of Chinese micro-enterprise[J]. China Industrial Economics,2016, (9): 59-74. (In Chinese)
 Liu B, Wei Q, Lu Yue, et al. Servitization of manufacturing and value chain upgrading[J]. Economic Research Journal,2016, (3): 151-162. (In Chinese)
 Wang S L, Teng Z W, Liu J. The disparity and convergence of TFP change in China’s service industry——Basedon regional and industry perspectives[J]. Economic Research Journal, 2015, (8): 73-84. (In Chinese)
 Xu H L, Cheng L H, Sun T Y. The effect of the input servitization of manufacturing on upgrading export
domestic value added of enterprises———empirical evidence from Chinese micro-enterprise[J]. China Industrial Economics, 2017, (10): 62-80. (In Chinese)
 Xuan Y, Yu Y Z. Spatial agglomeration of producer service industry and total factor productivity of manufacture enterprises[J]. Journal of Quantitative & Technical Economics, 2017, (2): 89-104. (In Chinese)
 Cai H, Liu Q. Competition and corporate tax avoidance: Evidence from Chinese industrial firms[J]. The Economic Journal, 2009, 119(537): 764–795.
 Eaton J, Kortum S, Kramarz F. An anatomy of international trade: Evidence from French firms[J]. Econometrica, 2003, 79(5): 1453–1498.
 Fisman R, Svensson J. Are corruption and taxation really harmful to growth? Firm level evidence[J]. Journal of Development Economics, 2007, 83(1): 63–75.
 Francois J, Manchin M, Tomberger P. Services linkages and the value added content of trade[J]. The World Economy, 2015, 38(11): 1631–1649.
 Grossman G, Rossi-Hansberg E. External economies and international trade redux[J]. The Quarterly Journal of Economics, 2010, 125(2): 829–858.
 Hansen N. Do producer services induce regional economic development?[J]. Journal of Regional Science, 1990, 30(4): 465–476.
 Hart O. Corporate governance: Some theory and implications[J]. The Economic Journal, 1995, 105(430): 678–689.
 Hijzen A, Pisu M, Upward R. Employment, job turnover, and trade in producer services: UK firm-level evidence[J]. Canadian Journal of Economics, 2011, 44(3): 1020–1043.
 Hsieh C, Klenow P. Misallocation and manufacturing TFP in China and India[J]. The Quarterly Journal of Economics, 2009, 124(4): 1403–1448.
 Lewbel A. Constructing instruments for regressions with measurement error when no additional data are available, with an application to patents and R&D[J]. Econometrica, 1997, 65(5): 1201–1214.
 Markusen J, Rutherford T, Tarr D. Trade and direct investment in producer services and the domestic market for expertise[J]. Canadian Journal of Economics, 2005, 38(3): 758–777.
 Neely A. Exploring the financial consequences of the servitization of manufacturing[J]. Operations Management Research, 2008, 1(2): 103–118.
 Shapiro J. Smart cities: Quality of life, productivity, and the growth effects of human capital[J]. The review of Economics and Statistics, 2006, 88(2): 324–335.
Cite this article
Tie Ying, He Huanlang. City Service Industry Development, Enterprise Export and Transformation of Processing Trade[J]. Journal of Finance and Economics, 2018, 44(3): 97–111.
Previous: Can Social Capital Narrow the Gap between Wages and Labor Productivity? Measurement and Conduction Mechanism Analysis