Service sector index hits high in positive sign

2019-04-04
China Daily

Activity in China’s service sector, measured by a private purchasing managers index for the service sector, rose to a 14-month high in March, indicating that government stimulus policies are gradually taking effect.

Analysts said emerging signs of Chinese economic stabilization mean the world’s second-largest economy is expected to play an important role in helping anchor the world economy, which, as IMF Managing Director Christine Lagarde cautioned, is at a “delicate moment”.

The Caixin/Markit services PMI, released on April 3, rose to 54.4, the highest since January 2018. It was 51.1 in February, the lowest in four months. A reading above 50 indicates expansion while below it indicates contraction.

The private survey results are in line with the official PMI reading for the service sector in March, which was 54.8, up from 54.3 in February, according to the National Bureau of Statistics. The official manufacturing PMI also rose to 50.5 in March from 49.2 the previous month.

As manufacturing and service activities picked up, analysts generally pointed to a recovering economy thanks to a series of supportive policies from the government since last year.

“We believe sentiment has improved and Beijing’s stimulus has been gradually kicking in,” said a research note by Nomura, a global securities firm.

“China’s economic fundamentals recovered in March, with domestic and external demand as well as manufacturing employment improving,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Beijing-based media group Caixin.

The Asian Development Bank said in a report released on April 3 that China’s economic growth is expected to be stable at 6.3 percent this year, unchanged from the previous forecast.

Given signs of slowing global economic growth, much attention has been paid to the development of China’s economy, which generally contributes about 30 percent to global growth annually.

“China has been an important engine for global growth in recent years,” said Liang Haiming, dean of Hainan University Belt and Road Research Institute.

“Given the Chinese economy’s weight in global growth, if it stabilizes, it will play a very positive role in boosting global trade and growth,” said Liang, who is also chairman of the China Silk Road iValley Research Institute.

In a speech on April 2, Lagarde expressed her concerns over uncertainties facing the global economy. She said a rebound later this year could happen but it is “precarious”, vulnerable to downside risks.

“So indeed, this is a delicate moment that requires us to handle with care,” she said. “This means that we must not only avoid policy missteps, but also be sure to take the right policy steps.”

The IMF chief said not everyone has benefited from trade integration, and there are “distortions” in the trade system that need to be addressed.

“We also know that trade barriers are not the answer,” she said, adding that it is very important to avoid missteps in that sphere.