China’s services sector contracted in August to one of the slowest paces of growth this year, according to an independent index released Wednesday, underscoring a fragile recovery in the world’s second-largest economy. The services sector, toward which the Asian giant is rebalancing its economic model, accounts for more than half of its gross domestic product (GDP) and is a key growth engine for the country.
The Purchasing Managers’ Index (PMI) for services, calculated by S&P Global and the Chinese economic media Caixin, stood at 51.6 points, compared to 52.1 in July. This sector, which is crucial for the Asian giant, is therefore continuing to progress, but at a less sustained pace: a figure above 50 indicates an expansion in activity, and below a contraction. The pace in August is the second weakest since the beginning of the year, after that of June (51.2). The slowdown in activity has had consequences in terms of employment: the workforce in services was reduced in August due to “resignations and layoffs linked to the need to cut costs”Caixin points out. A month earlier, hiring had been at its fastest pace in a year.
Uneven recovery
China lifted its Covid-19 health restrictions, which had hampered travel and business activity, in late 2022. This has allowed the service sector to rebound, with customers returning to restaurants, transport and tourist sites. But the recovery remains uneven and some sectors continue to struggle, particularly real estate and manufacturing.
China’s manufacturing activity contracted again in August for the fourth consecutive month, according to official figures released Saturday. The Caixin composite PMI, which combines services and manufacturing, held steady at the same pace as in July at 51.2 points. To stimulate activity, the government has stepped up measures to support the private sector and household consumption in recent months. But this remains insufficient, said Wang Zhe, an economist at Caixin. “Despite a trend towards stabilization of the economy in the second quarter, it remains significantly weaker than expected by the markets”souligne Wang Zhe.
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