The increased expansion rate is largely thanks to government-policy support since last year, but uncertainties still remain over future development if the US-China trade war drags on, according to an expert.
Caixin reported that the Caixin services index rose to 52.1 in August, up from 51.6 the previous month. The index in August also exceeded its expected reading at 51.7. Its composite PMI recorded 51.6 from July's 50.9. Readings above 50 suggest the sector is in the expansion region, while readings below indicate contraction.
Zhou Jingtong, a senior analyst from the Bank of China, told the Global Times on Wednesday that the rise in the index is largely due to the effects of government policy support, including the reduction of taxes and fees in middle- to small-sized enterprises.
"The pressure of the trade war is still looming over the services and manufacturing sectors, but government policy support from late last year has begun to show a buffering effect on companies," Zhou said.
The short-term recovery of the services sector is also expected to bring more jobs into the economy, according to Zhou.
In 2018, the services sector in China contributed around 359 million jobs, accounting for 46.3 percent of overall employment, according to government statistics.
However, Zhou also noted that the overall economy is still facing downward pressure in the mid-term, especially with uncertainties arising from the China-US trade war. On Sunday, the Trump administration began to impose a 15-percent tax on an estimated $125 billion of Chinese products. Another round of tariffs will also be added on a list of Chinese exports in December if negotiations remain stifled.
"It is unclear in the mid-term how the overall economy will be given the pressures, Zhou said, "but the services sector has remained relatively stable so far. With more policies to better the business environment and reduce business costs, there is reason for resilience even in the trade war."