| Abstract | The Export Sophistication Index (ESI) for merchandise trade is applied to Chinese services export. The global comparison shows that, from 2000 to 2010, the ESI of Chinese overall services has been less than 40% of the world average, with a deceasing trend especially after China’s entry into WTO in 2001. The comparison among 16 largest trade economies with the USA as a benchmark reveals that the ESIs of all Chinese services except Construction are far below those of the USA, and the overall services and sub-items such as Transportation, Insurance, Financial services, Royalties and license fees, and Personal, cultural, and recreational services have the lowest ESIs among the sample economies. Furthermore, the paper for the first time attempts to examine the impact of services export sophistication on the services trade balance. The result demonstrates that the lower (higher) the ESI for services, the greater the likelihood that services trade will be in deficit (surplus). This is a new interpretation of “services trade balance paradox” from the aspect of non-price factors, and thus implies that quality competition might be more crucial than price competition in services trade. |