Starting from 2008, the Chinese economy has been slowing down for nearly a decade. It's believed that this downward trend will continue, indicated by the 6 to 6.5 percent growth rate target in the government work report during this year's two sessions. This is also the lowest prediction of the Chinese government in the past several years.

There may be many causes: macro-economic factors, the natural slow-down after a quick increase in the size of the economy and the diminishing demographic dividend.

But there are two less prominent issues. One relates to the economic structure, i.e. the rising weight of service industries. The other is new growth opportunities brought about by the digital age.

Judging from the trend of world economic development, it's a common rule for growth to slow down as the service economy dawns.

The service industry is a low-efficiency and high-cost one, which will naturally decrease the overall economic growth.

The service industry became China's largest industry in 2012 and in 2015 contributed to over 50 percent of the whole economy. China has now entered a service economy-dominated phase.

International experience tells us that when the service industry takes over a half of the whole economy, economic growth rate will go downward.

China is likely to break this rule, because it has entered this phase in the digital age. The greatest feature of the digital age is connectivity, where services and manufacturing, and services and consumers are well connected.

A digital economy has a fundamental impact on service industries. With technologies of connectivity, internet and digitalization, new service industries are emerging and booming.

Traditional services cannot employ highly efficient manufacturing equipment. So teachers and students must have face-to-to face interactions, art needs to be performed and enjoyed on site, doctors must provide one-on-on treatment to patients and a housekeeper can only serve one family at one time.

But, with online courses, the same teacher can teach more students than before. Tsinghua University now has roughly 200 these courses, with over 8 million followers, meaning that one lecturer can teach 40,000 students. The most sought-after online course event has 1 million students.

Many cultural service industries are improving themselves too.

For live performances, a band playing for an audience on the stage is a tradition that has not changed for over a century. But after the performance is put online, with zero marginal cost, the audience numbers rise very quickly. Now, with the help of technologies in this digital era, service industries are becoming far more efficient. This is a massive and positive change.

What's more, internet and digital technologies are also enhancing the manufacturing sector and better combining services and manufacturing. The Internet of Things, artificial intelligence and robots are all fast-growing, with high added-value industries built on the basis of this combination.

In the internet age, technologies can promote in-depth integration of manufacturing and services. And China enjoys huge advantages in this regard, which will help the Chinese economy maintain a medium-high growth.

Connectivity technologies need a considerable size to play its role, and China, as a large country, has a huge economic size and scale.

So, a large country's service industry in the Internet and digital age can first achieve rapid development in the domestic market. And even a small project that caters to only 1 per cent of the total population has the chance of commercial and industrial operation considering the huge size of the Chinese economy.

China has many big cities with large populations to sustain many industries which require these kinds of support. This is an advantage.

Also, there is a special feature to Chinese service industries: it has producer services.

Take the furniture design industry in Shenzhen, for example. There, a company can be so specialized that it only designs one type of furniture and makes it rather elaborate. These producer services with such specialized division of labor are built on a large reservoir of users, which only large countries can sustain.

In addition, China boasts highly competitive internet services, which can grow first in domestic market and then enter the international stage. Many service industries of China have traveled this path.

Judging from experience, many constraints will emerge in the age of the service economy and an economic downturn is quite likely. But as China enters this age as well as the age of Internet and artificial intelligence, the situation is more positive and we can surely have a more optimistic perspective.

The author is Professor and Researcher of the Chinese Academy of Social Sciences，Member of Board Directors of CIDEG.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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