I. Introduction

There is a growing body of literature on the services sector in ASEAN. Koh (1985) studied the role of the services sector in ASEAN. Lee (1986) assessed trade in services between ASEAN and the United States. Tucker, Seow, and Sundberg (1983) looked at services in ASEAN-Australia trade. Pang (1985) provided an overview of ASEAN-EC trade in services. The present paper thus complements the existing studies on the services sector in ASEAN as it examines trade in services between ASEAN and China.

It is always difficult to define services as they constitute intangible output. There have been various attempts to define services and yet there is still no agreement among economists as to what constitutes a service (Riddle 1986; Bhagwati 1984; Kravis 1983; Hill 1977; and Smith 1973, among others).

Since the purpose of the present paper is to provide an understanding of the nature and importance of trade in services between ASEAN and China, a broad definition of services is adopted. Following the International Labour Organization (ILO) and Organization for Economic Co-operation and Development (OECD), the services sector comprises wholesale and retail trade, restaurants and hotels, transport, storage and communications, finance, insurance, real estate and business services, public administration and defence, and community and personal services. Trade in services refers to trans-border transactions in services between residents and non-residents. It also includes both trade and investment in services or invisibles in the balance of payments, including factor services such as investment income and workers' remittances.

Specifically, we want to distinguish the following categories of trade in services.

(1) Factor services and non-factor services. Factor services are normally defined as the investment income component of services plus requited transfers. The latter consists largely of workers' remittances. Thus, factor services are investment income and workers' remittances. Non-factor services comprise all other invisibles in the balance of payments.