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China's senior economists have urged the government to give more freedom to the country's service sector, which is regarded as key to solving the serious unemployment issue.

Gao Shangquan, director of the China Economic Restructuring Institute, said the focus in the world economy had turned from the traditional trade in commodities to the service sector but China's service sector lagged far behind developed countries.

The service sector in China only accounts for 33.3 per cent of the country's gross domestic product, while it accounts for 70 per cent on average in developed countries.

"The main reason lies in excessive control by the government, which gives rise to administrative monopolies and imposes stringent restrictions on the ability to operate according to market mechanisms," Gao told a national workshop on the service sector held recently in Hangzhou, capital of East China's Zhejiang Province.

He said more enterprises should be allowed to enter the fields of finance, energy, telecommunications and information technology. Competition should be encouraged as a way to upgrade quality and lower prices for services and products.

Cao Siyuan, a renowned economist who drafted the bankruptcy law adopted on December 2, 1986 by the Standing Committee of the National People's Congress, said the proportion of State-owned assets remained at a high level in the service sector.

Statistics from the State Development Planning Commission show 70 per cent of the fixed assets in the service sector are State-owned.

Out-of-date thinking and theories lie behind the "unreasonable" ownership set-up in this field, Cao said. For instance, decision-makers are usually prone to exaggerating the function of ideology in Internet cafes and ignore their service functions. Likewise, excessive stress is put on the finance and insurance industries' role in macroeconomic regulation rather than as parts of the service sector.

Gao said: "Much of the service sector has not yet enjoyed the benefits of a market-oriented distribution of capital, labour and resources."

He said market order should be established to reduce external interference in the sector. Administrative intervention should be avoided and relevant laws and regulations to this effect should be adjusted.