Growth slows in China's services sector, HSBC PMI shows

PUBLISHED : Tuesday, 08 October, 2013, 10:23am
UPDATED : Wednesday, 09 October, 2013, 5:23am

Growth in China’s services industry slowed in September, and optimism about the business outlook weakened, a private survey showed on Tuesday, indicating that the nascent recovery in the world’s No 2 economy is likely to remain a slow one.

The Markit/HSBC services PMI for September dipped to 52.4 from August’s 52.8, still well above the 50 line that separates expansion from contraction. A rise in new business offset a decline in new orders, the survey said.

The reading is in contrast to China’s official services PMI, released last week, which showed the sector expanded at the fastest pace in six months in September as demand grew. The official PMI rose to 55.4 in September from August’s 53.9.

The two surveys differ in that the official one is more weighted towards bigger and state-owned firms while the Markit/HSBC one looks more at smaller private firms.

The discrepancy points to the possibility of a two-tier recovery.

The services industry, which has so far weathered the global slowdown much better than the factory sector, is an increasingly important pillar in China’s economy, especially as the government seeks to expand domestic consumption to drive growth.

The services sector accounted for about 45 per cent of the economy last year and is the biggest employer in China.

The survey showed that business expectations weakened over the month, with respondents citing muted client demand.

China has unveiled plans to open up its largely sheltered services sector to foreign competition and to test financial reforms in a new free-trade zone in Shanghai.

Tuesday’s reading followed a pair of PMIs that showed slower-than-expected expansion in activity in China’s factory sector in September.

The official manufacturing PMI edged up to 51.1 from 51 in August, while the final Markit/HSBC PMI inched up to 50.2 from August’s 50.1.