1st October 2023 – (Beijing) China’s services sector expanded at its slowest pace this year in September, according to a private-sector survey. Despite a series of support measures, weak demand continued to weigh on the sector’s performance.
The Caixin/S&P Global Services Purchasing Managers’ Index (PMI) fell to 50.2 in September from 51.8 in August, marking the lowest reading since December. The 50-point threshold separates expansion from contraction in activity.
The world’s second-largest economy now faces risks of falling short of its growth target of around 5 percent this year. Officials are grappling with challenges such as a deteriorating property market, sluggish consumer spending, high debt levels, and geopolitical tensions. Major banks have already downgraded their forecasts for the year.
Wang Zhe, senior economist at Caixin Insight Group, highlighted that “services supply and demand grew at a slower pace in September, as market conditions improved less than expected.” Business confidence for the 12-month outlook also reached a 10-month low during the same period.
The survey revealed that services companies faced higher costs for staffing and fuel. However, there were some positive signs, as overseas orders expanded after a contraction in August, partly driven by an increase in foreign visitors.
The Caixin/S&P Composite PMI, which encompasses both manufacturing and services activities, declined to 50.9 in September from 51.7 in August, marking its weakest level since December.
Experts, including those at Nomura, suggest that services activity may have lost momentum as pent-up summer travel demand subsides.
The economic slowdown has led to diverging opinions among government advisers on the best path forward. Proponents of structural reforms are emerging as a challenge to those advocating for increased state spending to bolster faltering growth.
In response to the economic challenges, the central bank announced plans to intensify policy adjustments and implement monetary measures in a “precise and forceful” manner to support the economy.