Growth drop is not a cause for alarm, minister says

For 13 years, China's manufacturing sector has outperformed the service sector.

The trend seemed to reverse as the government increasingly pivots toward restructuring the economy away from investment and exports.

In 2012, the growth rates of the two sectors were on a par before the service sector outperformed manufacturing the following year.

The service sector was also more stable compared with manufacturing and was less vulnerable to fluctuations in the global economy, according to historical data.

In 2008, when manufacturing tumbled as a result of a setback in exports because of the outbreak of the US financial crisis, the service sector was less affected and posted faster growth than manufacturing, which was unusual at the time.

While China's manufacturing sector is plagued by rising labor costs, growing overcapacity and renminbi appreciation, economists said the service sector has a much larger room for growth thanks to years of underdevelopment.

Xu said the faster expansion rate of the service industry and other phenomena such as private investment outpacing State-led investment are positive signs that the economy is increasingly relying on domestic demand.

Zhou Xiaochuan, governor of the People's Bank of China, told his counterparts at the G20 meeting that reforms to rebalance the economy will continue. He said that the current account surplus last year was just 2.1 percent of GDP, down from as much as 10 percent during the boom years of the last decade.

Zhou said China's rising debt-to-GDP ratio and high leveraging of the corporate sector have already caught the government's attention.

He said China's large store of savings is being channeled through the banking system, pushing up credit growth and raising debt levels. Improving the nation's direct financing will be a "long task", he said.

China is "vigilant" about financial risks, and is keeping a close eye on its "shadow banks" — a sector that is growing quickly, though its overall size is not big, Zhou said.

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