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China services industry growth slows

Reuters . Beijing

A file photo shows a cook arranging baskets of newly-made dumplings at a restaurant in Shenyang, Liaoning province. — Reuters photo
 A file photo shows a cook arranging baskets of newly-made dumplings at a restaurant in Shenyang, Liaoning province. — Reuters photo

Growth in China’s services industries slowed in December, a pair of surveys showed, mirroring a slowdown in manufacturing and confirming views that the world’s second-largest economy lost steam at the end of last year.
The HSBC/Markit Economics services Purchasing Managers’ Index (PMI) dropped to 50.9 in December, its lowest since August 2011, from 52.5 in November, HSBC said on Monday.
New business expansion was the slowest in six months.
The PMI follows a similar survey by China’s National Bureau of Statistics on Friday, which showed a slowdown in service-sector growth to a four-month low of 54.6 from the previous month’s 56.0.
Both surveys follow two other PMIs last week that showed China’s factory activity slowed in December, suggesting the moderation in the country’s growth in the final quarter of 2013 was broad-based.
But all four measures remained above the 50 point level that separates expansion in activity from contraction.
China’s economy has regained some momentum since mid-year after a protracted slowdown. While it was expected to lose steam as the government reins in rampant credit growth and demand for China’s exports remains subdued, activity has remained resilient into the December quarter.
Beijing has said it will accept slower growth as it tries to reshape the economy towards more sustainable growth, based on consumer demand, after three decades of breakneck expansion led by exports and credit.
China’s economic growth is likely to come in at 7.6 per cent in 2013, the government has said, just above the official target of 7.5 per cent and slightly below the 7.7 per cent in 2012. Data for 2013 GDP is set to be released on January 20.
The weaker PMIs added steam to a fall in Asian markets on Monday, on concern over whether China’s slowdown will continue into the first quarter.
‘What has been the principal sort of driver of the market since the beginning of the new year has been a disappointment of the Chinese PMI data,’ said Guy Stear, Asian credit and equity strategist at Societe Generale in Hong Kong, adding that growth in China is a ‘focal point’ for markets.
MSCI’s broadest index of Asia-Pacific shares excluding Japan .MIAPJ0000PUS was down 0.6 per cent, reaching a two-week low and adding to a 1.1 per cent drop on Friday. China’s CSI300 index .CSI300 fell 2.5 per cent, hitting a five-month low.
The HSBC/Markit services PMI’s sub-index measuring new business orders dropped to a six-month low of 51.8 in December on subdued client demand.
However, labour market conditions improved for the fourth consecutive month, with the employment sub-index growing at the strongest pace since June, mainly due to company expansions, the PMI showed.
‘We expect the steady expansion of manufacturing sectors to lend support to service sector growth,’ said HSBC’s China chief economist, Qu Hongbin.
‘Moreover, the implementation of reforms such as lowering the entry barriers for private business in service sectors and expanded VAT reforms should help to revitalise service sectors in the year ahead,’ Qu said.
The HSBC/Markit PMI covers more smaller private firms than the official one, which is more weighted towards bigger state owned enterprises that can weather slowdowns better.
 




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