Growth slowing for services

Waitresses serve snacks at a teahouse in Chaohu, Anhui province. The non-manufacturing Purchasing Managers' Index decreased to 53.9 in June from 54.3 in May. LI YUANBO / FOR CHINA DAILY

Non-manufacturing sector loses steam, putting jobs under pressure

The expansion pace of China's non-manufacturing industries decelerated to a nine-month low in June, in line with the weakest factory activity in four months, suggesting higher downside risk to second-quarter economic growth.

The non-manufacturing Purchasing Managers' Index in June dropped to 53.9 from 54.3 in May, indicating a slower expansion of the service and construction sectors, the National Bureau of Statistics said on Wednesday.

The small slip in June mainly reflected the seasonal factor in construction activity, said Cai Jin, vice-chairman of the China Federation of Logistics and Purchasing.

Last month, the sub-index for new orders in the non-manufacturing sector slightly rebounded to 50.3 from 50.1, and the new export orders sub-index rose to 50.4 from a one-year low of 49.1 in May.

"That can provide stable growth momentum in the near future," Cai said.

"Maximizing the service sector's growth potential should be one of the key points for macroeconomic policy adjustment."

A separate survey from HSBC Holdings released on Wednesday showed a modest increase in service business activity, as the PMI slightly rose to 51.3 in June from 51.2 in May, reflecting steady but weak expansion.

But Qu Hongbin, the chief Chinese economist at HSBC, said the underlying growth momentum of the service industry is probably softening, along with the slowdown of manufacturing growth.

"With the sluggish growth of new orders, employment growth is under pressure," said Qu. "As the value-added tax reforms are likely to take time to filter through, we expect slower growth in the service sectors in the coming months."