During the 1990s, China has experienced a surge in imports of services, particularly those of communication, insurance and other business services, despite the fact that the authorities have maintained a plethora of restrictive measures limiting access to the service sector. Not only does this cast strong doubt over the effectiveness of these measures currently in place but also raises some important political-economy questions regarding the market access issues related to this sector.

Following a brief review of the country’s efforts made since 1994 to sustain its openeconomy reforms, the paper takes stock of major policy developments in the service sector and discusses the pros and cons of liberalisation of services.

The paper argues that a further liberalisation of services would be imperative for China to develop a more viable and dynamic service sector and stands to gain the full benefits of globalisation. The protective measures imposed for short-term, political ...