AStudy On The Effect Of Market Structure Of Service Industry And Institutional Environment On Servicizing Of Industrial Structure

Since the reform and opening up policy implemented in1978, Chinese economyhas maintained strong growth momentum. Until2012, China has surpassed Japan asthe2ndlargest economy all over the world and ranked into upper middle incomecountry with rapid increase of income per capita in recent years. However, the growthpattern of Chinese economy is unbalanced reflected by the slow development ofservice industry, whose development level is not only much lower than domesticmanufacturing industry, but also lower than other countries on similar income level.The deviation of evolution of Chinese industrial structure from internationalexperience and general law of industry development has raised this paper’s doubt ontraditional evolution theory of industry structure.In order to fix up the shortcoming of current evolution theory of industrystructure, based on basic features of service product, this paper systemicallyinvestigates the effect of market structure of service industry and institutionenvironment on evolution process of industry structure from theoretical and empiricalperspectives.The theoretical analysis suggests that, the monopolistic market structure resultsfrom high cost of production factor induced by factor exclusivity, governmentalinterventions aim to deal with market failure and influence of institutional design oninput of soft infrastructure and border of governmental actions, is harmful to thedevelopment of service industry by impeding cross-industry flow of productionfactors. In addition, the service industry is characterized by institution-intensivebecause of the basic features of intangibility, intergrowth of production andconsumption, heterogeneity and non-storage of service products, which results inconcentrated input of institutional factor into the process of production, transactionand consumption of service industry. In short, the quality of institution environmentsignificantly affects the development level of service industry and servicizing processof industrial structure.Combined with the empirical evidence of Chinese service industry, this paper empirically test the effects of institution environment, factor exclusivity andgovernmental intervention on entry rates of Chinese main service sectors. Theempirical results show that, the increase of entry rate of service industries issignificantly promoted by releasing the administrative regulation of entry access anddecline of tax burden level, but it is obstructed by strict administrative approvalsystem, heavy tax burden, lack of capital input and R&D investment, andoverwhelming revenue and capital proportion of state-owned economy. Especially,higher requirement for human capital and R&D investment significantly impedesentry activities in knowledge-and technology-intensive service industries. Moreover,international and domestic empirical evidence both shows that, the quality ofinstitution environment has a positive correlation with development level of serviceindustry and servicizing process, which means higher quality of institutionenvironment plays a more important role in promoting the trend of servicizing anddevelopment of service industry, but becomes an obstacle when the quality fallsbelow a certain level.Take China (Shanghai) Pilot Free Trade Zone for example, this paper alsoinvestigate the direction and approach of accelerating the development of Chineseservice industry by breaking existing distribution pattern. As the testing ground ofdeepening Chinese economic restructuring, Shanghai Free Trade Zone aims toachieve the goal of reform and development by further opening the scope of serviceindustry and capital account, and accelerating the reform of current market accessmechanism in service sector and administrative approval system.Finally, under the background of monopolistic market structure of Chineseservice sector and low quality of domestic institution environment, this paperproposes some related policy implications on promoting the industrial growth andservicizing process based on the above theoretical and empirical conclusions, whichaims to meet the needs of market-oriented reform and transforming the pattern ofeconomic development. Furthermore, prospects of further study have also beenpredicted at the end of this paper.