This aerial photo taken on Dec. 10, 2022 shows a view of the Yangpu international container terminal in the Yangpu Economic Development Zone, south China's Hainan Province.  (Xinhua/Pu Xiaoxu)

Activity in China's services sector rebounded in December and market confidence improved in the wake of optimized anti-COVID measures, a private survey showed on Thursday.

The Caixin services purchasing managers' index (PMI) stood at 48.0 in December, up 1.3 points from November, though it remained in contraction territory. The 50-point mark separates growth from contraction.

However, the optimization of coronavirus responses seems to rebuild confidence in the services market, with the business expectations index rising to the highest since August 2021.

Surveyed enterprises generally believed that an improvement in the optimization of coronavirus responses will support a rebound in sales and business activities. In addition, increased investment and policy support were cited as likely drivers of growth.

According to the survey, affected by the pandemic, production and demand in the services sector continued to shrink in December, but factors like the optimized anti-epidemic policies led to an improvement in the new order index, as well as production and operation activities.

Poor market conditions dragged down employment in the sector, which remained in contraction in December, but the employment index saw a slight rebound, though some companies trimmed jobs to cut costs.

Driven by the rising costs of raw materials and labor, the overall costs of the services sector continued to increase, which led to a rise in service prices. However, due to weak demand, the factory price index fell to a four-month low.

Exports pulled back in December, with the new export orders index falling into contraction territory again in the month, the survey showed.

"The surging number of infections in the short term in December had a strong impact on normal social production and life, and how to efficiently coordinate COVID responses and economic and social development has become a top priority," Wang Zhe, a senior economist at Caixin Insight Group, said.

According to the National Bureau of Statistics, the official manufacturing PMI fell 1.0 points to 47.0, while the services PMI came in at 39.4 for December.

Wang noted that the central government has prioritized the recovery and expansion of consumption to propel economic growth, as well as coordinated policies to stabilize the employment and effectively raise disposable incomes.

Global Times