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China’s services sector activity expanded at the fastest pace in five months in December, according to a widely watched private survey, showing that policymakers in Beijing believe the world’s second-largest economy is struggling. It offers some optimism as it seeks to stimulate a recovery.
The seasonally adjusted Caixin Service Purchasing Managers Business Conditions Index for December, released on Thursday, rose to 52.9 from 51.5 the previous month, above the 50-point mark that separates expansion from contraction. The figure was higher than the 51.6 expected by economists compiled by Bloomberg.
Activity expanded for the 12th consecutive month and at the fastest pace since July. New orders increased, export demand expanded, and companies’ outlook for 2024 improved.
“Optimism has spread… Businesses are expressing confidence in improving economic prospects next year,” said Wang Zhe, senior economist at Caixin Insight Group.
Caixin Manufacturing PMI also showed some expansion in December, improving slightly from the previous month.
But the data contrasts with official PMI figures released by the Office for National Statistics on Sunday, which showed services activity contracted for the second consecutive month, with the sector at its lowest level since the easing of coronavirus restrictions in late 2022. was shown to be declining.
The December figures are the latest to show that China’s economic recovery is mixed, with economists pointing to weak factory activity, lagging exports and negative growth in consumer prices, while questioning the health of the services sector. It emphasizes the signs of
China’s economy has struggled to overcome weak consumer demand and a long-term slump in its core real estate sector, with the expected post-COVID-19 recovery failing to take hold last year and a decline in manufacturing and services. Activity declined.
Analysts at Goldman Sachs said the difference in results could be due to different coverage, with the official index focusing on companies with smaller export markets and lower spending due to colder winter temperatures. He said he is placing more emphasis on companies in the north that may have been affected.
The construction sector showed a notable recovery, expanding at the fastest pace in six months, while manufacturing slowed slightly compared to the previous month, official figures showed.
According to the Ministry of Culture, an increase in domestic tourism in December also benefited the economy, with the number of travelers during the three-day New Year holiday reaching 135 million, compared to 2019 before the coronavirus spread across the country. This is an increase of 9.4% compared to the same period in 2017. And tourism.
“The latest surveys suggest that growth continued to recover in December, but momentum remains quite subdued. However, they are distorted by the impact of sentiment and therefore the extent of the economic downturn. may be overstated,” Capital Economics analysts wrote in a note.
Analysts cited “policy tailwinds” and predicted that “growth will continue to regain momentum in the next quarter or two.”
Policymakers in Beijing have enacted gradual economic stimulus measures such as interest rate cuts and targeted lending to accelerate momentum, efforts that boost confidence in the world’s second-largest economy. has almost failed.
Finance Minister Lan Huo-an said in an interview published Thursday by the Communist Party’s mouthpiece People’s Daily that fiscal spending would increase this year to “better play the role of stimulating domestic demand.”
He added that the central government will continue to transfer funds to support local governments whose finances are strained due to the struggling real estate market, and will pursue tax cuts to support technological development and the development of manufacturing.