China economy

Services sector boom aids mainland economic recovery

PUBLISHED : Monday, 04 February, 2013, 12:00am
UPDATED : Monday, 04 February, 2013, 4:21am

The mainland's services industries rose last month at the fastest pace since August as gains in retailing and construction aided a recovery in the economy.

The non-manufacturing purchasing managers' index rose to 56.2 from 56.1 in December, the National Bureau of Statistics and the China Federation of Logistics and Purchasing said in a statement yesterday. A reading above 50 indicates expansion.

The Shanghai Composite Index last week posted the best weekly gain since October 2011 on optimism that Beijing can sustain the nation's expansion and control the risk that inflation will surge. Strength in services may assist a shift to a consumption-driven economy as the government targets more sustainable growth and factory output contributes to record pollution.

Huang Yiping, the chief Asia economist with Barclays in Hong Kong, said: "The economy should be on a gradually improving path."

However, Huang said there was a risk that inflation would pick up faster than the consensus was expecting.

The logistics federation said yesterday the retailing industry saw an obvious improvement, while new orders in civil engineering and infrastructure construction rose to the highest since March last year.

In contrast, gauges of activity and new orders for commercial property dropped below the 50 level that divides expansion from contraction, indicating the property market was entering the low season, it said.

The restaurant industry suffered from an austerity drive instigated by Communist Party chiefs that includes a ban on lavish banquets by bureaucrats. The sector's business activity index fell 17.3 points from the reading in January last year and the new orders gauge fell 6.5 points to below 50.

An index of intermediate input prices rose 4.4 points to a 10-month high of 58.2, a rebound that was a cause for concern, according to Cai Jin, a vice-president at the logistics federation.

The contribution of services to the economy has grown over the past decade as rising incomes have spurred demand for televisions, housing, mobile phones and travel. Almost 36 per cent of the working population was employed in such industries in 2011, up from 31.3 per cent in 2005.

Services industries accounted for 45 per cent of gross domestic product last year, Ma Jiantang, the head of the statistics bureau, said last month, up from 41 per cent in 2003. The government is seeking to increase the share to 47 per cent by 2015.