China private service firms鈥 activity slows
Print Edition
China’s service activity in private companies expanded at the slowest pace in 28 months in December, pointing to growing weakness in the world’s second-largest economy.
The HSBC China Services Business Activity Index, a gauge of operating conditions in private service companies, ended at 50.9 in December, down sharply from 52.5 a month earlier and was the weakest since August 2011, HSBC Holdings Plc and consulting firm Markit said yesterday.
A reading above 50 means expansion and the latest reading suggested a slight rise in business activity in the Chinese service sector, according to the survey.
Comparatively, China’s official non-manufacturing Purchasing Managers’ Index, compiled by the China Federation of Logistics and Purchasing and slanted toward state-owned service enterprises, also eased to a four-month low of 54.6 in December from 56 in November.
Qu Hongbin, chief economist for China at HSBC, said the moderation of the China services index reflected slower new business growth, but labor market conditions improved for the fourth month in a row.
“We expect the steady expansion of manufacturing sectors to lend support to service sector growth,” Qu said. “Moreover, the implementation of reforms such as lowering the entry barriers for private business in the service sectors and the expanded VAT reforms should help to revitalize services in the year ahead.”
Meanwhile, the progressive tax reform has enabled more regions to implement value-added taxes, which benefit the service sector most due to its calculation method based on created value.
The survey showed that 26 percent of Chinese service providers last month expect output to increase.
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