Service sector activity at 3-month high in China

BEIJING • Activity in China's service sector expanded at the fastest pace in three months last month as new orders rose, prompting the biggest increase in hiring in over a year, a private survey showed yesterday.

Stronger job creation by firms in the service sector will be welcome news for Beijing, which is struggling to reverse a prolonged slump in the manufacturing sector which has dragged economic growth to near 30-year lows.

The Caixin/Markit services purchasing managers' index picked up to 52.1 last month, the highest since May, compared with July's 51.6. The index has stayed above the 50-point that separates growth from contraction on a monthly basis since late 2005.

New business accelerated slightly to a four-month high, with companies citing improving underlying demand and a boost from new projects. But a sub-index for export orders pulled back from July's three-month high, possibly due to heightened United States-China trade row.

The service sector accounts for over half of China's economy, providing a key buffer to mounting export pressures. But growth has been generally cooling over the past year as businesses and consumers grow more cautious on spending.

Washington began slapping 15 per cent tariffs on a wide range of Chinese goods on Sunday - including footwear, smart watches and flat-panel television sets. Tariffs of 15 per cent on cellphones, laptops, toys and clothing are to take effect on Dec 15.

The private survey's findings largely dovetailed with an official gauge last week, which also showed improving service sector conditions.

"China's economy showed clear signs of a recovery in August, especially in the employment sector," said Mr Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, in a statement released alongside the data.

There were signs that government growth-boosting measures were gradually kicking in, he said.

"However, the US-China trade conflict remained a drag, and business confidence remained depressed," he added.

While business optimism for the year ahead improved, the reading was still below levels seen in late 2017 and early last year before the two countries began imposing tit-for-tat tariffs.

"Still, there's no need to be too pessimistic about China's economy, with the launch of a series of policies to promote high-quality growth," Mr Zhong said.

So far, Beijing has relied on a combination of fiscal stimulus and monetary easing to cushion the broader economic slowdown, including hundreds of billions of dollars in infrastructure spending and tax cuts for companies.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 05, 2019, with the headline 'Service sector activity at 3-month high in China'. Print Edition | Subscribe