Research On The Impact Of Price Distortions In China's Factor Market On The Development Of Service Industries

Industrialization in China has brought an excessive manufacturing capacity.Even though many countries have issued a large number of policies to expand domestic demand,domestic market space based on manufacturing industry is not large.Therefore,service industries are urgently needed in the service sector reform of the supply side to promote potential for strong domestic demand.In 2014,the Chinese service industry was accounted for 28.3%,which is more than the industry sales.But compared with the services sector accounted for in the developed countries,China's service industry development is relatively lagging.In the face of the decline of present China's economic growth,the central economic work first proposed "advancing supply side structural reform " in November 10,2015,the focus of which is on "structural reform,accelerating the distortion correction factor allocation,expanding the effective supply,improving the supply structure adaptability and flexibility,improving the total factor productivity".Market can be divided into product market and factor market.When the elements of market economy reform are incomplete,the difference between factor prices and the cost of elements of opportunity is too large,resulting in the elements being not optimal in the allocation of resources.That is the factor price distortion.This paper takes the Chinese factor market price distortion as the breaking point,considering that because of the slow process of the elements marketization and market price distortion,a large number of obstacles exist in the process of elements flowing to the services,causing the insufficient development of the service industry,which may also cause the imbalance of industrial structure and the decline of economic growth.Theoretically,based on the Three Element Theory,the paper chooses land(Arable land and construction land,energy,ecological environment),capital and labor as the three factors of production to analyze the influence of price distortion on the development of service industry.In terms of land elements,the price of the use of land as industrial land is much lower than that used as land for services with the intention of developing industry.Capital flows to industry rather than services at lower costs and has greater returns.Furthermore,in terms of energy prices,only the price of production is reflected,making the enterprises more willing to engage in high energy-consuming industries rather than in service industries.The penalties for companies that are destroying the natural environment are not enough,motivating the investors to engage in industry,especially productive service industries,rather thanservice industries.In the meantime,the price of water and electricity is higher in service industry than in any other industries.In terms of capital elements,the existence of national control of interest rate,on the one hand,makes it harder for service industry to get low interest loans and on the other hand,makes it difficult for service industry to obtain the mortgage of real estate under low cost.The two factors together influence the development of service industry.In terms of labor force,the differences in the units of ownership in enterprices,in professions and in the urban-rural dual system lead to the differences in the salaries of the employees and their benefits.This will distort the labor price.In the meantime,in the case of the distortion of the land and capital elements,it will naturally reduce the land force that flows into the service industry.In the empirical analysis,this paper using the GMM-SYS method selects the data in China's 14 service industries in 30 provinces(except Tibet)from 2002 to 2014,analyzing the influence of factor market distortions on the development of industrial and service sectors.The results show that the distortion of the factor market in China is not conducive to the growth of the service industry,and the distortion of the factor market is not conducive to the sustainable development of China's economy.By further dividing the service industry into productive service industry,consumer service industry and public service industry,we can detect the impact of price distortions on the three types of services.The results show that the distortion of the price of those elements has a significant impact on the development of productive service industry and public service industry.However,it has no influence on the consumer service industry.Based on the above analysis,this paper puts forward five suggestions for improvement of the policy: the reform of China land system should be strengthened,market formation mechanisms of land price must be promoted,reform of interest rate marketization needs to be accelerated,environmental law enforcement should be made,reform of the household registration system must be promoted in an orderly manner,and social security and social services should be improved.