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China’s services sector activity expanded at the fastest pace in five months in December, according to a widely watched private survey, offering some optimism as policymakers in Beijing seek to stimulate a faltering recovery in the world’s second-largest economy.
The seasonally adjusted Caixin services purchasing managers’ index released on Thursday rose to 52.9 in December from 51.5 the previous month, above the 50-point threshold that separates expansion from contraction. The figure was ahead of the forecast of 51.6 by economists polled by Bloomberg.
Activity expanded for the 12th consecutive month and at the fastest pace since July. New orders increased, export demand grew and companies’ outlooks for 2024 improved.
“Optimism prevailed . . . with enterprises expressing confidence in an improved economic outlook for the coming year,” said Wang Zhe, senior economist at Caixin Insight Group.
The Caixin manufacturing PMI also showed a slight expansion in December and a marginal improvement from the previous month.
But the data contrasted official PMI figures released on Sunday by the National Bureau of Statistics, which showed services activity shrank for a second month and the sector languishing at its lowest point since the unwinding of Covid-19 restrictions in late 2022.
The December data was the latest to illustrate a mixed economic recovery in China, with economists highlighting nascent signs of health in the services sector while pointing to weak factory activity, lagging exports and negative consumer price growth.
China’s economy has struggled to overcome weak consumer demand and a prolonged slowdown in the cornerstone property sector, with manufacturing and services activity underperforming last year after an anticipated post-Covid rebound failed to take hold.
Analysts at Goldman Sachs said the disparity in the surveys’ findings could be attributed to their divergent coverage, with the official index placing greater emphasis on companies with smaller export markets as well as those in the north, where cooler winter temperatures may have suppressed spending.
The official data showed a marked recovery in the construction sector, which expanded at its fastest rate in six months, but a slight weakening in manufacturing compared with previous months.
The economy also benefited from a rise in domestic tourism in December, with the number of trips reaching 135mn during the three-day new year holiday, up 9.4 per cent from the same period in 2019 before Covid spread nationwide, according to the Ministry of Culture and Tourism.
“The latest surveys imply that while growth continued to recover in December, momentum remains fairly subdued. However, they may be distorted by sentiment effects and therefore overstate the extent of economic weakness,” analysts at Capital Economics wrote in a note.
Citing “policy tailwinds”, the analysts projected that “growth will continue to regain some vigour over the next quarter or two”.
Policymakers in Beijing have enacted piecemeal stimulus measures, such as rate cuts and targeted lending, in an effort to jump-start momentum, but the efforts have largely failed to boost confidence in the world’s second-largest economy.
In an interview published on Thursday by the People’s Daily, a Communist party mouthpiece, finance minister Lan Fo’an said fiscal spending would increase this year to “better play the role of stimulating domestic demand”.
He added that the central government would continue to transfer funds to help support local authorities, whose finances have been strained by property market woes, and would pursue tax cuts to support technological and manufacturing development.
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