China's service sector expands at slowest pace in 29 months
Print Edition
Activity in China’s private service companies grew at its slowest pace in 29 months in January, signaling weaker expansion in business and new orders.
The HSBC China Services Business Activity Index, a gauge of operating conditions in private service companies, ended at 50.7 last month, down from December’s 50.9, HSBC Holdings Plc and consulting firm Markit said yesterday.
A reading above 50 indicates expansion.
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 23-month low of 53.4 in January from 54.6 a month earlier.
Qu Hongbin, chief economist for China at HSBC, said the slower expansion of service activities reflected soft manufacturing growth and the impact of China’s latest measures to curb extravagance.
“As business sentiment remains stable, we expect service growth to bounce back a little in the coming months,” Qu said. He added that a meaningful improvement relied on stronger growth of manufacturing and the implementation of reforms to boost services.
The report noted that January saw the weakest increase in new business since last June, and the expansion of payroll numbers was the slowest in four months.
The slowdown in the service sector echoed weakening activity in the manufacturing sector to reveal softer economic prospects going into the new year.
The official manufacturing PMI dropped to a six-month low of 50.5 percent in January.
The HSBC China Composite PMI, which covers both manufacturing and services, also fell to a six-month low of 50.8 in January from 51.2 in December, but the reading has been in expansion for six consecutive months.
Output growth has weakened to marginal rates at both manufacturers and service providers, and both have cut their selling prices, according to the report.
“The further easing in January manufacturing PMIs reinforces the trend of softening growth momentum since the fourth quarter of last year,” said Zhu Haibin, chief China economist at JP Morgan.
He said he expected stable consumption growth and moderate improvement in exports in the months ahead, but said the good news will be more than offset by a slowdown in fixed investment, which can be attributed to lingering manufacturing overcapacity, tighter local government financing and a slowdown in the housing market.
According to analysts, China’s slowing growth is largely due to the country’s deepening reforms in economic restructuring, and it is good for China to address problems such as overcapacity and low investment efficiency.
The World Bank earlier lowered its expectation of China’s 2014 economic growth to 7.7 percent from the previous 8 percent, reflecting deleveraging and less reliance on policy-induced investment.
China has said it is aiming to forge ahead with reforms this year while maintaining stable economic growth by sticking to a proactive fiscal policy and a prudent monetary policy.
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