China’s Caixin services purchasing managers’ index (PMI), a private gauge of the country’s services sector, stood at 53.9 in June, down 3.2 points from the previous month but remaining in the expansion territory for the sixth straight month, a private survey showed on Wednesday.
Analysts said the figure indicates that the country’s services sector continues the expansion trend, although rising domestic and external challenges have dragged down the pace of expansion. They called for further policy support to drive up domestic demand, increase incomes and strengthen market expectations to rev up economic recovery.
In June, the Caixin services PMI, which is focused on small and medium-sized enterprises, came in higher than the 52.8 official figure released by the National Bureau of Statistics on Friday.
A reading above 50 indicates expansion, while a reading below reflects contraction.
According to Caixin, services business activity and new orders continued to show expansion in June, but at a lower pace compared with the previous month. New export business growth also remained in the expansion zone for a sixth consecutive month.
It’s worth noting that service enterprises’ confidence increased for the first time over the past five months. Businesses broadly expect the country’s economy to further improve over the next 12 months, which will benefit sales growth and operations.
According to business leaders, the recovery of the services sector benefits from the surge in tourism and transport spending following China’s adjustment of COVID-19 prevention measures. Services companies signaled the need for more workers to recover their output amid a rise in demand, but they also reported notable rise in labor costs and raw material prices.
Wang Zhe, senior economist at Caixin Insight Group, said the foundation for economic recovery isn’t solid yet and the recovery pace remains below expectations, with challenges including weak internal growth momentum, below-average demand and mixed market expectations.
“China’s services sector recovery has been mainly impacted by the weakening external demand amid potential economic recession in some Western economies and bearish market sentiment,” Cong Yi, a professor at the Tianjin University of Finance and Economics, told the Global Times on Wednesday.
Cong expressed optimism about China’s continued economic recovery for the rest of 2023 following supportive measures and the gradual restoration of production. The Chinese economy is bound to recover strongly thanks to the resilience of Chinese economy and the advantage of a vast market, large population and economic volume, he said, pointing to fiscal policies such as the handing out of consumption vouchers, to increasing residents’ disposable income.
China UnionPay said in a report released on Wednesday that it issued consumption coupons for 285 localities across China in 2022, adding to the transaction volume by nearly 50 billion yuan ($6.9 billion), according to media reports.
Policymakers should further step up macroeconomic support and increase implementation efficiency to ensure that market entities feel the benefits of policy dividends and earnestly improve employment and market expectations, Wang said.
The National Development and Reform Commission, China’s top economic planner, said recently that it would accelerate the formulation and implementation of policies to restore and expand domestic consumption, aiming to continuously improve the consumption environment and unleash the potential for service consumption.
The People’s Bank of China, the country’s central bank, announced on Friday that it had decided to increase the relending and rediscount quota by 200 billion yuan for the agriculture sector and small enterprises as part of its efforts to reduce the cost of financing and expand employment while lending more steam to the recovery of the economy.
(Global Times)
