CHINA SERVICES SECTOR SOARS

Fastest expansion pace in 6 years as new orders surge and companies hire more staff

CHINA’S services sector got off to a flying start this year, expanding at its fastest pace in almost six years as new orders surged and companies rushed to hire more staff, a private survey showed yesterday.

Economists also attributed the robust strength in services last month to better access to bank loans at the start of the year and solid demand before the long Chinese New Year celebrations in the middle of this month.

The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 54.7 last month from December’s 53.9, marking the highest reading since May 2012. The 50-mark separates growth from contraction on a monthly basis.

The upbeat findings, which echoed those of an official gauge of the non-manufacturing sector last week, bode well for Beijing’s longer-term goal of overhauling and modernising its economic growth model.

The government is counting on growth in consumption and services, particularly in high valueadded areas such as finance and technology, to reduce the economy’s traditional reliance on heavy industry, investment and exports.

The services sector already accounts for over half of China’s economy, with rising wages giving its consumers more spending power at home and abroad.

New business increased at the fastest pace in 32 months, the survey showed, with respondents linking the rise to new projects, company expansions and greater initiatives to win new clients.

The effort led companies to hire new workers at the fastest pace in five months.

Better access to financing likely also played a role in the sharp improvement in business condi- tions, said some analysts. The survey focuses on small and medium firms which traditionally tend to have a tougher time securing funds than their larger state-owned peers.

However, firms’ strong optimism about the business outlook over the next year eased to a four-month low on concerns that economic conditions may soften.

Profit margins also remained under pressure. Many companies reported a stiff rise in input costs for raw materials, transportation and salaries, but the survey suggested they were having a tough time passing higher costs on to their customers. Reuters