For over three decades, China has been known as the factory of the world. It has made everything from plastic toy cars to mobile phone handsets at a cost and speed no other country could match.
Solar panels, electric vehicles, and the lithiumion batteries inside them followed. Most developed economies, the US and Europe among them, moved their manufacturing to China to cut costs and sold the output back home.
That chapter is not closed, but a new one has begun. China is now moving into services.
Its global trade increasingly includes software, engineering, artificial intelligence (AI) and professional services. As Chinese companies expand abroad, they take their digital tools, supply-chain know-how and business capabilities with them. The gains for developing economies are real, but they will depend on local participation, market access and the rules governing cross-border trade.
The change reflects how firms now compete.
Manufacturers no longer sell only physical products. They also supply technology, logistics, financing and technical support needed to develop, distribute and maintain them. A growing share of a product’s value now comes from services supplied before or after the sale.
Manufacturing remains central to China’s external trade, but services are catching up. With tariffs, geopolitical tensions and protectionism making merchandise trade harder, Chinese companies are exporting the capabilities behind their products: research and development, software, marketing and supply-chain management.
China is already a heavyweight here. According to the UN Trade and Development-World Trade Organisation database, it was the world’s fifthlargest exporter of commercial services and second-largest importer in 2024. Services make up around 27 to 28pc of global trade. Goods and agriculture still account for more than 70pc. Global trade rose by about 6pc in 2025, while services trade grew by more than 8pc. About half of China’s services exports are now digitally deliverable or knowledge-intensive.
The recent numbers are striking. China’s Ministry of Commerce says services exports rose 17.1pc year-on-year to 1.77 trillion yuan in the first seven months of 2026. Knowledgeintensive services grew 12.2pc to 948bn yuan, over half the total.
Chinese firms have moved through exportsand then overseas investment. Many are now taking their technical and commercial skills into foreign markets, with retail, biotechnology and pharmaceuticals joining manufacturing and high technology. Al is speeding this up.
Companies use it to study demand overseas, find customers, design products, produce marketing material and run supply chains, which lets them tailor products to each market at lower cost.
For developing economies like Pakistan, China’s services push could bring investment, technology transfer, skills and digital tools, but none of it is automatic. The real issue here is whether expansion builds local capacity or merely extends the reach of foreign suppliers.
Joint ventures with domestic firms, training for local workers and openings for small businesses in supply chains would help countries keep more of the value created.
China’s own policies will shape its competitiveness as well. Services contributed 57.7pc of its economic output in 2025, up from around 40pc two decades ago, yet that is still below the share of 70-80pc in many advanced economies. Beijing has been opening up through a negative-list approach, under which sectors are open unless specifically restricted. Domestic openness will not settle everything.
China’s services expansion is unlikely to displace manufacturing as the main source of its global influence anytime soon. But the two are becoming inseparable. The next phase of trade will depend not only on what countries make but also on the software, expertise and business services they can offer.
As Chinese firms set up supply chains, factories, research units and customer-service operations abroad, they need help in unfamiliar markets: market intelligence, partner screening, credit assessment, risk management and compliance. Demand is shifting from one-off advisory work to integrated services. Companies want to find and verify suppliers and partners, understand ownership structures, manage cash flow and meet rules in several jurisdictions at once.
For developing economies, the opportunity lies in joining this wider value chain. Local partnerships, better skills, competitive domestic firms and transparent rules will decide whether services trade brings lasting gains or leaves them dependent on imported technology and expertise.