Abstract: Since the reform and opening up, the service industry has become the largest industry in China's national economy. However, compared with developed countries, the development level of China's service industry (especially the modern service industry) is still quite lagging in terms of total scale and internal industry structure. The logic behind this phenomenon lies in the fact that the international OEM mode under the export-oriented strategy has a positive technology spillover effect on domestic localized service companies at the supply level, but it also has a negative market crowding out effect at the demand level. With the deepening of the division of labor in globalization, this market crowding out effect is gradually surpassing the technology spillover effect. Accordingly, this article puts forward the important proposition that the development of China's service industry under the background of the new era must turn to a domestic demand-led strategy. In monopolistic competition, promote the innovation and development of current and future service industries.
