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November 4, 2016

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Boom in services, growth in jobs suggest ‘economy is stabilizing’

CHINA’S services sector grew at its fastest rate in four months in October as businesses took on new workers to meet demand, adding to signs the economy is stabilizing after slowing growth.

The Caixin China General Services Purchasing Managers’ Index, released yesterday, rose to 52.4 in October, the best reading since June and up from 52 in September. A reading above 50 suggests expansion in activity.

Services companies expanded their payrolls for the second month in a row, with the rate of growth edging up to its strongest since January, showed the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

Firms that hired additional workers generally said they were expanding and expecting orders to continue growing in the future, the survey showed.

Business expectations were more positive than the previous month, but still slightly below August when they hit a six-month high.

The survey reinforced the message of an official National Bureau of Statistics report released on Tuesday, which stated that non-manufacturing PMI grew at a faster pace in October to 54 from 53.7 in September, marking the highest level this year.

“Overall, the economy continued to expand in October and at a stronger growth rate,” said Zhong Zhengsheng, director of macro-economic analysis at CEBM Group.

However, firms are not without challenges. The latest survey revealed that firms are facing intensified inflationary pressure in tandem with flat service charges, suggesting waning corporate profitability.

“Prices charged for Chinese services were little changed from the previous month, with some companies mentioning that increased competitive pressures had limited their pricing power,” the survey said.

Experts believe that the pickup in both official and private PMI data can provide policy-makers with more room to check on financial and real estate risks, as well as to speed up structural reforms.

While keeping a relatively high growth pace, there should be a focus on economic restructuring, industrial upgrading and finding new growth drivers, said Zhang Liqun, a researcher at the Development Research Center of the State Council, China’s Cabinet.

Economic restructuring has shown nascent progress, with the service industry accounting for 52.8 percent of GDP in the first three quarters — up 1.6 percentage points from the same period of last year.


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