The huge income gap between the rich and poor in China has hindered development of the country's service industry, a report from the Chinese Academy of Social Sciences said in Beijing Tuesday.

The increase of China's per capita GDP has stimulated the development of China's service industry, but many Chinese people are not big consumers of services as they earn just enough to live, the report read.

In addition, the luxury service sector has developed rapidly to meet the demand of relatively small group of rich people, while there are inadequate low-cost services of acceptable standards for the middle and working classes, according to the report.

"China's service industry has not entered a stage of fast development as expected," the report said.

China's service industry accounted for 40.2 percent of the country's total GDP in 2005, down from 41.7 percent in 2002, while the world average is over 60 percent.

(Xinhua News Agency January 24, 2007)