Slower growth in China’s services sector signals govt remedial measures to kick in soon: analyst

By Wang Cong Source:Global Times Published: 2018/9/5 14:13:39

A private survey on Wednesday showed that growth in the country's services sector slowed to a 10-month low in August due to moderate growth in new business orders and rising costs, in a sign that may prompt the government to roll out more remedial measures to ease downward pressure in the Chinese economy amid domestic and external pressure.

The Caixin China General Services Purchasing Managers' Index (PMI), a main gauge of activity at services companies, stood at 51.5 in August, 1.3 percentage points lower than the level in July, according to a statement from Caixin.

While the Caixin services PMI remained in expansion territory in August, the level was the lowest in 10 months. A PMI reading above 50 points indicates expansion, while below that level means contraction.

In the statement, Caixin attributed the slower expansion in China's services sector to continuous weak new businesses and further increases in costs. Despite improving from July's 31-month low, the rate of expansion in new businesses remained modest, adding that operating expenses for services companies also saw a "solid" increase in August.

"This is in line with the overall downward pressure the Chinese economy is facing due to deteriorating external conditions," said Liu Xuezhi, a senior analyst at the Bank of Communications, noting that the trade war with the US, along with slower growth in domestic consumption, has weighed on demand for both services and manufacturing companies.

The Caixin Manufacturing PMI released on Monday also recorded a 14-month low of 50.6 in August after dropping for three-consecutive months.

"From all these indications, there is no doubt that we have been seeing a tough time in the second half of the year, but the overall situation is not as bad as it sounds. Don't forget: the economy is still growing, just at a slower pace," Liu told the Global Times, adding that remedial measures from the Chinese government are likely to kick in soon.

Since the end of July, Chinese policymakers have taken a slew of measures to ease downward pressure, including increasing fiscal spending, boosting liquidity and reducing tax and other burdens on companies, according to Liu.

"It has only been a little over a month, so the effectiveness of these measures has not been reflected in the recent data. But we will see more measures and will eventually see results," he said.


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