SHANGHAI — A private survey released Monday showed China’s services sector growing faster in May than it has in months.
The services Purchasing Managers Index survey from Caixin Media Co. and Markit, a research firm, reached 52.8 in May, after a reading of 51.5 in April. A reading of over 50 indicates a sector’s expansion, while under 50 indicates a contraction.
Caixin’s PMI surveys include small and medium-sized enterprises that are left out of official government surveys. Small and medium-sized companies employ about 80 percent of China’s official working population of 907.5 million people.
In a more concerning survey, also released last week, the Caixin/Markit manufacturing PMI showed a significant deceleration in activity; its reading fell to 49.6 in May, down from 50.3 in April and the lowest reading seen in eleven months.
Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, was cautious about the mixed results.
“The improvement in the services sector bolstered the Chinese economy in May. However, the rapid deterioration in the manufacturing industry is worrying,” he said. “We need to closely monitor whether the diverging trends in manufacturing and services will widen further.”
China’s government has made no secret of its desire to boost services, particularly high value-added services in finance and technology, in order to lessen its economy’s reliance on heavy industry and investment.
In spite of this boost from the services sector, China’s quarterly economic growth is widely expected to slow in the coming months from the 6.9 percent increase seen in the January to March period. The government has set a GDP growth target of “around 6.5 percent” for 2017, after last year’s growth of 6.7 percent, the lowest level China has seen in 26 years.
“We should not underestimate the senior leadership’s desire to contain financial leverage and risk, efforts which have only just begun, even if it may lead to slower credit and economic growth,” UBS Group AG economists, led by Hong Kong-based Wang Tao, wrote in a report.
“However, given the need to meet other government priorities, most notably growth stability, we expect the government to constantly adjust the pace and magnitude of its supervisory tightening to strike a delicate balance.”