China’s service sector which makes up for half of the economy has started the year with a high, as it posted the fastest growth in six years. The sector received new orders and companies are looking to hire more staff quickly to fulfill those orders as per the data released by a private survey. Economists attribute the growth in January by the Service sector to easy access to bank loans and growing local demand as the Lunar New Year which is in February approaches.
The PMI or the purchasing manager’s index of the Caixin/Markit services fell a little below from its December value of 53.9 to 53.6, but the good news is that it is way above the 50.0 mark which shows that the growth is moderate but not reduced. Moreover, the service sector is greatly supported by overseas sales as now new export businesses are rising at a fast rate and attracting foreign clients. New orders also picked up a little in January when compared to December and rose to 52.6 from 52.3. Earlier, there was an official survey which said that the growth in the non-manufacturing sector was good and the private survey adds to the upbeat mood. This data is good for the Beijing government as it aims to change the economic growth model by overhauling it and modernizing it.
There is great concern worldwide as China which is the second largest economy is seeing an economic slowdown and the service sector which is half of the Chinese economy is doing well is good news not only for China but for other counties too. The sector is critical to over the slowdown in manufacturing as the factories are hit by various social and political factors which include the trade war with the US. The government is depending on customer demand and spending on the service sector especially finance and technology to improve the economy and also to reduce the dependence on exports, manufacturing, and investment.
Zhong Zhengsheng who is the director at CEBM group said that the critical component in the Chinese economy is the policies that the Chinese government introduced to help increase domestic demand and development. Beijing had taken many measures to help the growth which includes reducing the threshold of the cash that bank has to hold to increase lending, reducing taxes and fees and increased spending on infrastructure. However, the key remains the resolution of the trade war with the US.