By Imran Khalid

Editor's Note: The writer is a freelance columnist on international affairs based in Karachi, Pakistan. The article reflects the author's opinions and not necessarily the views of China Economic Net.

The landscape of global value chains has been in a state of profound flux for several years, shaped by geopolitical frictions, technological advancements, and the urgent demands for resilient supply networks and environmental sustainability. These pressures have nudged the world economy away from the era of unchecked fragmentation toward more regionalized and diversified arrangements. In this evolving context, China has emerged as a pivotal actor, transitioning from a manufacturing powerhouse to a leader in service-oriented models that emphasize knowledge and innovation.

For much of the past few decades, the global economy thrived on highly dispersed production networks, where components crisscrossed borders in pursuit of efficiency. Yet, the vulnerabilities laid bare by the pandemic, coupled with rising rivalries that prompted strategies aimed at reducing dependencies, have accelerated a reconfiguration. Analyses indicate that by this year, a substantial majority of firms are prioritizing diversification in their supply chains, signaling not a retreat from globalization but an opportunity to rebuild it on sturdier, more equitable foundations. Rather than succumbing to isolationist tendencies, nations like China are harnessing service trade to knit together disparate regions, promoting cooperative frameworks that transcend narrow national interests.

China's approach stands in contrast to exclusionary tactics, favoring initiatives that link resources across continents. The Belt and Road Initiative exemplify this, facilitating connectivity that enhances efficiency and lowers barriers. In the first four months of this year, service exports climbed to $160 billion, a 14.6 percent rise, with knowledge-intensive segments comprising $83 billion. This momentum continued into May, when total trade in goods and services reached about 4.16 trillion yuan, up 3 percent from the previous year. More recent figures for the first eight months show exports overall surging by 5.9 percent to $2.45 trillion, underscoring resilience amid global uncertainties.

A notable instance is the enhancement of the China-Europe Railway Express through digital partnerships, incorporating 5G and artificial intelligence to streamline logistics across more than 40 countries, trimming costs by around 20 percent. Such endeavors illustrate how services can erode trade obstacles, enabling broader resource allocation and positioning China as an integral contributor to these networks, thanks to its receptiveness to foreign capital and expertise.

The service sector worldwide is pivoting from sheer volume to superior quality, now accounting for over half of gross domestic product in numerous countries, with digital integration nearing 45 percent. This evolution elevates services from auxiliary functions to core drivers in value chains, reshaping the conventional hierarchy that often confines developing economies to low-end tasks. China is actively partnering with global entities to advance this change, fostering a more balanced international division of labor through innovative, knowledge-rich offerings.

Openness and innovation form the cornerstone of this integration, bolstered by collaborative efforts on the world stage. Frameworks like the Regional Comprehensive Economic Partnership have deepened regional bonds, while expanded access in service trade pilots across several cities has drawn substantial foreign direct investment, exceeding 70 percent of inflows in recent years. Platforms have facilitated agricultural shipments from Belt and Road nations to Europe, yielding billions in trade value early this year.

The magnetism of large markets like China's draws service resources worldwide. Patent filings under international treaties have outpaced those of the United States since 2023, and foreign investment in services topped $300 billion over the past couple of years. Spillover effects are evident: smart logistics systems at Peru's Chancay Port have boosted efficiency by 20 percent, while electric vehicle networks in Europe have spurred service export surges, establishing norms for environmentally conscious globalization. These contributions aid other nations in sidestepping developmental pitfalls, transforming zero-sum rivalries into collective advancement. Infrastructure and green tech outflows improve local operations and promote low-carbon models internationally.

The ongoing China International Fair for Trade in Services in Beijing, which opened this week with participation from 85 countries and nearly 2,000 enterprises, including hundreds of Fortunes 500 firms, embodies this vision. Themed around intelligent technologies empowering trade, it features AI innovations across sectors and has already witnessed deals like Australian collaborations in education and commerce.