BEIJING • Activity in China's service sector grew at its slowest pace in 21 months last month as new orders cooled, a survey showed, blurring the picture of the economy's performance ahead of a key Communist Party congress.
The findings by a Caixin/Markit survey reinforce views that China's smaller companies are struggling, while state-owned giants are apparently reaping most of the benefits from a year-long state-led construction boom.
However, many analysts believe China's robust industrial rally cannot be sustained much longer, putting pressure on policymakers to find ways to energise the lacklustre private sector, which accounts for over half of the country's investment and jobs.
The central bank threw a fresh lifeline to smaller firms on Sept 30 in an attempt to redress the deep structural imbalance, offering an earnings booster to banks if they ramp up lending to the more vulnerable sectors of the economy.
China is counting on growth in services, particularly high-value-added services in finance and technology, to reduce the economy's traditional reliance on heavy industry and investment.
But yesterday's survey suggested many service-sector firms are facing a bumpy ride. The Caixin/Markit services purchasing managers' index fell to 50.6 last month, the lowest reading since December 2015 and one of the weakest since the survey began in 2005. A reading above 50 indicates growth, and that below signals contraction. The index had hit a three-month high in August.
Still, Capital Economics' China economist Julian Evans-Pritchard, who has been predicting a broader slowdown, said it was too early to tell if the weaker Caixin service survey pointed to a turning point yet.
"It is notable that there are signs of weakness in other parts of the economy and I do think services have softened a bit... I think we will see a slowdown in industrial production as well over the coming few months," he added.