China's service sector sees solid growth in Jan

China's service firms added to their payroll numbers last month. The resilience of the service sector, which accounts for more than half of China's gross domestic product, is key to countering the ongoing slowdown in manufacturing.
China's service firms added to their payroll numbers last month. The resilience of the service sector, which accounts for more than half of China's gross domestic product, is key to countering the ongoing slowdown in manufacturing.PHOTO: REUTERS

BEIJING • China's sprawling service sector maintained a solid pace of expansion last month even though growth moderated slightly, a private survey showed on Sunday, offering continued support for the world's second-largest economy as manufacturing cools.

The Caixin/Markit services purchasing managers' index (PMI) fell slightly to 53.6 last month from 53.9 in December, but well above the 50 mark separating growth from contraction.

Overseas sales continued to support the sector, with new export business rising at the fastest clip in more than a year, due to efforts among Chinese service firms to attract foreign clients. Overall new orders also ticked higher, to 52.6 from 52.3 in December.

The resilience of the service sector, which accounts for more than half of China's gross domestic product, is key to countering the ongoing slowdown in manufacturing.

Chinese factories have been hit by a long-term restructuring of industries, a crackdown on pollution and China's trade tensions with the United States.

"Overall, China's economic growth was weighed on by weakening domestic demand in January, although exports improved marginally as the Sino-US trade negotiations flagged signs of progress," said Dr Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. China's policies to support domestic demand and developments in the trade war "will remain key to the prospects of the Chinese economy", he added.

"Given that the government has refrained from taking policies of strong stimulus, the downward trend of the economy may be hard to turn around for the time being."

Caixin's composite manufacturing and services PMI, also released on Sunday, slipped to 50.9 last month from 52.2 in December. The January manufacturing PMI, announced last Friday, was 48.3, the lowest since February 2016.

Beijing has taken a raft of measures in the past year to encourage growth - reducing the levels of cash that banks must hold as reserves to spur lending, cutting taxes and fees, and expediting infrastructure spending.

Resolving trade tensions with the United States remains key to improving sentiment and lifting the outlook for Chinese exporters.

Illustrating how China's service sector is holding up, service firms added to their payroll numbers last month. Inflation pressures eased, with operating costs and output charges rising at a slower pace.

Caixin's upbeat readings for services were consistent with an official survey published last Thursday that showed the industry picked up for a second straight month in January.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 05, 2019, with the headline 'China's service sector sees solid growth in Jan'. Print Edition | Subscribe