Sun, Aug 04, 2013 - Page 13 News List

China stabilizes as services pick up

UNEXPECTED EXPANSION:China could meet its GDP expansion target for this year after a manufacturing gauge showed more than a 50 percent jump from June to July

Bloomberg

China’s service industries showed the first pick-up in growth since March, adding to signs the world’s second-largest economy may be stabilizing after a two-quarter slowdown.

The non-manufacturing Purchasing Managers’ Index rose to 54.1 in July from 53.9 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday. An official gauge of manufacturing released on Thursday showed an unexpected expansion.

Quicker growth in non-manufacturing industries coudl bolster Chinese Premier Li Keqiang’s (李克強) confidence that China can achieve its target for this year in expansion in gross domestic product amid a campaign to rein in financial risks and control local government debt. State Council measures to help small businesses and the overhaul of the value-added tax system will provide more support for services companies, according to Barclays and Reorient Financial Markets.

“The services sector PMI has been doing much better than manufacturing for some time and the corporate expectations index was at its highest this year, which shows confidence is returning,” Reorient’s chief China economist Steve Wang said. “The PMI is supposed to be a leading indicator so we are witnessing a stabilization and a sign the economy isn’t slowing down at a faster rate.”

China’s economy grew 7.5 percent from a year earlier in the April-June period, slowing for a second straight quarter and extending the longest streak of sub-8 percent expansion in at least two decades. Wang says he sees second-half growth of 7.6 percent, the same as the pace in the first six months.

The government set a expansion target of 7.5 percent for this year. The economy grew 7.8 percent last year, the least since 1999.

The non-manufacturing PMI has not dropped below 50, the dividing line between expansion and contraction, since a new data series started in March 2011, and a services gauge from HSBC Holdings and Markit Economics has shown expansion for at least four years. An index of business expectations in yesterday’s report rose to 63.9 from 61.8 in June, the highest since December.

Last month’s readings indicate a “relatively good start to second-half economic activities,” Cai Jin, a vice chairman at the logistics federation, said in a statement. “The foundation and conditions to ensure stable economic growth are there even though we continue to face challenges.”

Investment in services rose 23.5 percent in the first-half of this year, outpacing the 15.6 percent growth in manufacturing spending, and its value-added output also rose faster she said.

While the employment index in last month’s official manufacturing PMI had a below-50 reading for a 14th month, the gauge in yesterday’s report showed expansion, with a figure of 51.3, down from June’s reading of 51.5.

“Jobs aren’t being created in manufacturing, it’s services where all the growth is going to come from, especially sectors like e-commerce, with companies like Alibaba (阿里巴巴),” Reorient’s Wang said, referring to China’s biggest e-commerce company that runs online shopping platform Taobao Marketplace.

Industries including leisure, e-commerce and transport are becoming a bigger part of the economy, supporting the government’s efforts to shift the focus of growth away from investment and exports. Their contribution to GDP in the first quarter exceeded that of manufacturing for the first time, the central bank said in a statement in April.

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