China must first liberalize its domestic market and establish a comprehensive legal system if it wants to increase the competitiveness of the nation's service industries.

To fulfill its commitments to the World Trade Organization (WTO), the country must gradually liberalize its service market, as stipulated in the timetable it submitted to the WTO.

"Liberalization of the nation's domestic markets before opening to the outside world is crucial, as it should help Chinese enterprises increase operation efficiency and enhance their international competitiveness before they face the full force of open global trading," said Li Shantong yesterday at the WTO and China 2003 Beijing International Forum.

Li is the director of the Developing Strategy and Regional Economy Research Department of the Development Research Centre of the State Council.

The nation should encourage private enterprises to enter the service sectors, which are to be opened to foreign investors soon.

These sectors include the education, tourism and media industries.

"Market reform should be quickly accelerated in some monopolized industries, including telecommunications, finance, insurance and public transportation," said Li.

Geza Feketekuty, currently a professor with the US-based Moneterey Institute of International Studies and formerly with the Office of the US Trade Representative for 21 years, said that it was necessary for China to "build a competitive and high-growth economy through liberalization and reform of services."

Optimization of the service structure, expanding the role of modern service industries and introducing high-tech innovations in traditional sectors is also important.

Official statistics show that traditional sectors made up 60 per cent of China's service industries as a whole last year and more than half of China's service export volume was in tourism and freight transport in 2001.

Along with the development of China's service industries and the requirements of WTO membership, a complete legal system for the service industries is required.

So far, the central government has issued and revised a series of laws and regulations concerning commercial banks, insurance, lawyers and maritime affairs, but there is no comprehensive law for the service industries as a whole.

Feketekuty pointed out that, keeping in mind its own specific conditions, China should refer to international rules and practices and keep in line with WTO principles in formulating a legal system to regulate the supervision and operation of its service industries.

This will help ensure free and fair competition in the domestic market and hence "stimulate Chinese service providers to adapt quickly to the competitiveness and transparency of the international market."

"In addition, we should consolidate the existing service laws and regulations and update them to keep them in line with WTO requirements to avoid unnecessary disputes," Li added.