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Expansion of private services slowest in 28 months in China

By Wang Yanlin | January 6, 2014, Monday | Online Edition

CHINA’S service activity in private companies expanded at the slowest pace in 28 months in December, indicating growing weakness in the world’s second-largest economy. But not all signs were pessimistic.

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, HSBC Holdings Plc and consulting firm Markit said today.

A reading above 50 means expansion and the latest reading suggested a slight increase 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 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 PMI 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 service sectors and the expanded VAT reforms should help to revitalize service sectors in the year ahead.”

China’s economy has shown signs of moderating growth in the past few months. Its gross domestic product may ease to around 7.5 percent in the fourth quarter from 7.8 percent in the previous three months, analysts said.

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