Ser­vices mit­i­gate man­u­fac­tur­ing malaise

Govern­ment opts for ‘soft’ stim­u­lus mea­sures to achieve growth tar­gets this year

China Daily (Canada) - - BUSINESS - By CHEN JIA chen­jia1@chi­nadaily.com.cn

The steady ex­pan­sion of Chi­nese ser­vice businesses in March com­forted pol­i­cy­mak­ers dur­ing a pe­riod of gloom for the man­u­fac­tur­ing sec­tor, but it is un­likely to stop the slow­ing mo­men­tum for eco­nomic growth in the first quar­ter of the year. The govern­ment has de­cided to take “soft” stim­u­lus mea­sures, in­clud­ing the ren­o­va­tion of shan­ty­towns, rail­way con­struc­tion and pref­er­en­tial tax poli­cies for more small com­pa­nies to sup­port growth.

The Na­tional Bureau of Sta­tis­tics and the China Fed­er­a­tion of Lo­gis­tics and Pur­chas­ing re­ported on Thurs­day that the non-man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex in­March fell slightly to 54.4 from 55 in Fe­bru­ary, mainly be­cause of a slow­down of growth in neworders.

It in­di­cated the non-man­u­fac­tur­ing in­dus­try still main­tained a rel­a­tively fast growth rate, said Cai Jin, vice-pres­i­dent at the fed­er­a­tion.

The read­ing in Jan­uary was 53.4, the low­est level since 2009.

A sep­a­rate sur­vey by the Bri­tish bank HSBC Hold­ings Plc showed the ser­vicesPMIat 51.9 in March, up from 51 in Fe­bru­ary, sug­gest­ing growth in ser­vice ac­tiv­ity strength­ened to a four-month high.

Qu Hong­bin, chief econ­o­mist in China and the joint head of Asian Eco­nomic Re­search at HSBC, said the lat­est PMI fig­ure “sug­gests a mod­est im­prove­ment of busi­ness ac­tiv­ity in March, with em­ploy­ment ex­pand­ing at a faster pace”.

The HSBC sur­vey showed that higher vol­umes of new work led ser­vice providers to ex­pand their pay­roll num­bers at the fastest rate since June 2013, which off­set job losses by man­u­fac­tur­ers.

“How­ever, com­bined with the weaker man­u­fac­tur­ing PMI read­ing, the un­der­ly­ing mo­men­tum of the econ­omy is soft­en­ing, which should ul­ti­mately weigh on the la­bor mar­ket. The govern­ment should fo­cus on leading in­di­ca­tors

NON-MAN­U­FAC­TUR­ING PMI READ­INGS to launch mea­sures that growth,” said Qu.

On Tues­day, HSBC re­leased its March man­u­fac­tur­ing PMI of 48, down from 48.5 in Fe­bru­ary, a de­te­ri­o­ra­tion for the third con­sec­u­tive month.

Mean­while, the of­fi­cial man­u­fac­tur­ing PMI edged up in­March to 50.3 from the Fe­bru­ary read­ing of 50.2, but still lower than the aver­age of 51.3 in the fourth quar­ter of 2013.

Louis Kuijs, chief econ­o­mist in­China at Royal Bank of Scot­land Plc, said: “Swings in man­u­fac­tur­ing growth tend to be more pro­nounced than those in the ser­vices sec­tor. In­China, the role of the ser­vices sec­tor is in­creas­ing trend-wise be­cause of a chang­ing growth pat­tern.”

Ac­cord­ing to Na­tional fine-tun­ing

sup­port Bureau of Sta­tis­tics data, the ser­vice sec­tor grew faster than in­dus­try last year. “The non-man­u­fac­tur­ing PMI has held up bet­ter in re­cent months, and this has helped to keep the la­bor mar­ket healthy,” Kuijs said.

Pre­mier Li Ke­qiang on Wed­nes­day chaired a State Coun­cil ex­ec­u­tive meet­ing at which he an­nounced the mod­est eco­nomic sup­port mea­sures. The meet­ing also clar­i­fied fi­nanc­ing sources for the planned in­vest­ment projects.

It sug­gests that credit sup­ply­may re­bound in the sec­ond quar­ter, said econ­o­mists from No­mura Se­cu­ri­ties Co Ltd in a re­search re­port. “These mea­sures clearly show that the pace of pol­icy eas­ing is pick­ing up,” they said.

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