Published January 02, 2013
BEIJING – Growth in China's increasingly important non-manufacturing sector accelerated in December, adding to signs of a modest year-end revival in the world's second-largest economy.
China's official purchasing managers' index (PMI) for the non-manufacturing sector rose to a four-month high of 56.1 in December from 55.6 in November, the National Bureau of Statistics (NBS) said on Thursday.
The services sector index follows twin manufacturing PMI surveys that showed China's growth reviving in December, although signs persist that such growth still depends primarily on state-led investment.
The official manufacturing PMI survey in December matched November's seven-month high of 50.6, the NBS said on Tuesday, while a complementary survey with a greater focus on the private sector reached 51.5, its highest since May 2011.
The muted revival has led some analysts to predict a shallow economic recovery, with Dariusz Kowalczyk of Credit Agricole CIB expecting the current cycle to peak in the final quarter of 2012 or the first quarter of 2013, in sharp contrast to China's previous, much more pronounced bull cycles.
"Absolute levels of both December manufacturing and non-manufacturing PMIs remain relatively low by historical standards and consistent with only modest rebound in economic activity," Kowalczyk, Credit Agricole's senior economist for Asia except Japan, said on Thursday.
A reading above 50 indicates growth is accelerating, while one below 50 indicates it is slowing.
The greatest driver was a jump in a sub-index measuring construction services, to 61.9 from 61.3 last month, while industries including transport slumped, the NBS said in an accompanying statement.
The construction services strength is consistent with other indicators, including rising land prices, that point to a revival in China's property markets, which support about 40 other industries. The signs of strength come despite central government protestations that it will not relax credit and purchasing curbs that have stifled the sector for the past two years.
The slowdown in the transport sector is also consistent with poor external markets for China's exports.
SERVICES GROW IN IMPORTANCE
China's fast-growing services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signaling healthy expansion and hitting a 10-month high of 58.0 in March.
That's partly due to a maturing economy as well as a historic shift over the last decade to the majority of Chinese living and working in cities rather than the countryside.
China's service sector generated 43 percent of China's GDP in 2010 and by 2011 provided nearly 36 percent of new jobs, exceeding the agricultural sector for the first time.
"Expanding domestic demand will be a major stimulus for China's economic growth, and the greatest potential will come from the service sector," Xia Nong, deputy director-general of the Department of Industry under the National Development and Reform Commission, said on Friday, according to the China Daily.
Xia pledged to open the services sector to more foreign competition as well as encouraging Chinese service firms to go overseas.
Foreign investment into the service sector of $47.57 billion in the first 11 months of 2012 surpassed that directed to the manufacturing industry, which slumped by 7.1 percent, the China Daily said over the weekend, citing Ministry of Commerce data.
The growing services sector has taken up some of the slack from the property sector, which has struggled with investment and purchasing restrictions as well as a credit crunch.
Overseas company investment into China's urban transportation surged 24-fold in the first 11 months from a year ago, followed by a 12-fold rise in telecommunications and other information services, and a sevenfold increase in pipeline transportation industries, at sevenfold, the China Daily said, again citing Ministry of Commerce figures.
The sector, formerly the bastion of smaller private businesses, is now important enough to have its own five-year plan, issued in September.
(Editing by Neil Fullick)