The State Council recently issued the Notice on Implementation of the Policy and Method of Accelerating Service Industry Development (hereafter, the Opinions), requiring all regions and related departments to lose no time in working out or modifying development programs of service industry, raising the level of opening up to the outside world in service sector, optimizing the policy environment for service industry, expanding the pilot project of preferential tax policy for IP services, guiding and encouraging social capital to invest in IP transactions and promoting the formation of leading enterprises with independent intellectual property rights and renowned brands in service sector.

The document explicitly encourages technological innovation in service sector. Measures should be taken to search methods to launch IP pledge financing and guide and encourage social capital to invest in IP transactions. Qualified enterprises can enjoy related preferential policies of venture investment organizations. The Ministry of Science and Technology, together with other relevant departments, is required to fully implement the Outline of National Medium-and-Long-Term Science and Technology Development, and carry out the important demonstration project of development and application of the generic technology in modern service industry. The role of related national industrialization bases should be brought into full play to establish a batch of public service platforms such as research and design (R&D), information consultation and production inspection, and set up R&D centers and intermediary agencies. The Ministry of Finance and the National Development and Reform Commission should make detailed advices, provide supports for loans with preferential interest rates to major technology introduction projects and technology reform in service sector, financially assist the activities of learning, analyzing and innovating introduced projects, give priority to information services such as computer software made in China with independent IPR in government purchasing, and further expand the pilot project of venture investment.

The Notice says that measures should be taken to actively innovate the organizational structure of service industry. All regions and related departments should encourage service industry to be developed into large scale with chain stores and renowned brands, so as to form a batch of leading enterprises in service sector with independent IPR, renowned brands and comparatively higher competitive power. Brand promotion strategy should be accelerated. Great efforts should be made to support enterprises to launch independent brand construction and encourage enterprises to register and use their own brands. Logistics enterprises are encouraged to cooperate with production enterprises to form the sound interactive development of service brands promoting product brands and product brands raising the level of service brands. Measures should be taken to foster and develop renowned brands and the Ministry of Commerce and other related departments should support qualified brands with related national special funds such as the Central Development Fund for Foreign Trade. Chinese long-term traditional famous brands should be supported. During city construction, these traditional famous stores should be properly located in the same region or to other commercial districts suitable for their development, and should be compensated strictly according to the state regulations.

According to the document, the preferential tax policy should be further expanded. Measures should be taken to carefully implement related stipulations in the Enterprise Income Tax Law and its implementing regulations. Service enterprises’ product R&D should be supported and their real expenses in this regard can be used to compensate their income tax according to related preferential policies. Efforts should be made to accelerate the promotion of the pilot income tax and operation policies of encouraging the development of service enterprises with advanced technologies in Suzhou Industrial Park, and actively expand the pilot project of preferential tax policy for the development of service industry such as IPR services. Service industry with independent innovation, energy saving and emission reduction and resource saving should get more preferential tax policy. Meanwhile, the Notice points out those enterprises in IP service should supply supports for service enterprises to go abroad.

In addition, it also has clear requirements regarding deepening reforms in service sector, strengthening the basic work of service industry and enhancing capital injection to service sector.

The Opinions include 23 policy measures in seven aspects such as the planning and improvement of industrial policy in service sector, containing more than 6,000 Chinese characters. According to Xia Nong, Vice Director of the Department of Industrial Policies under the National Development and Reform Commission, China maintained value added of 9.6 trillion yuan from service industry in 2007, up 11.4 percent year on year. However, the service industry has not yet finished fundamentally change, as its contribution to China’s GDP coming down.