The Caixin/Markit survey, which focuses on smaller private firms, followed strong readings of official PMIs, which cover large State-owned companies. The official manufacturing PMI rose to 50.5 in March, while non-manufacturing PMI rose to 54.8. Together, they offer a positive picture of China's massive manufacturing and services sectors. Photo: VCG

 
China reported a slowdown in the expansion of business activity in the services sector in December 2019. Analysts said seasonal factors were major causes of the slowdown, and that the country’s overall economy would get off to a sound start in the new year as market confidence is boosted by the China-US phase-one trade deal. 

China’s Caixin Purchasing Managers' Index (PMI) for the services sector was recorded at 52.5 in December 2019, down 1 percentage point from its previous reading.

A reading above 50 indicates expansion, while a reading below indicates contraction.

Liu Xuezhi, a senior economist at the Bank of Communications, attributed the weak performance to seasonal factors. The services industry - production services in particular – had reported slow growth by the end of the year.

Tian Yun, vice president of the Beijing Economic Operation Association, agreed with this assessment, saying that “the slowdown in the services sector was affected by downward pressure on the economy and the early Chinese New Year, which usually comes in February - Spring Festival will start on January 25 this year.” 

Liu told the Global Times on Monday that the decline points to the downward pressure on China’s economic growth, which is due to sluggish domestic and overseas demand. “Despite the drop, the index still signals the industry is within the expansion territory.”

The growth of the services and manufacturing industries decreased slightly in December 2019, but overall domestic economic development continued to stabilize, according to Zhong Zhengsheng, director of macroeconomic analysis at consultancy CEBM Group.

The phase-one trade deal recently reached by China and the US will help enterprises build up confidence, and China’s economic growth is likely to have an auspicious start in 2020, Zhong said, noting that it will still face limited demand throughout the year.

The Caixin manufacturing PMI edged down 0.3 percentage points to 51.5 in December 2019, according to data released by Caixin on Thursday.

The drop in the sector dragged down the Caixin China General Composite PMI to 52.6, a decline of 0.6 percentage points.

The PMI in the first quarter of 2020 is likely to continue the downward trend seen in the third and fourth quarters of 2019, but its pace will be curbed, Tian told the Global Times on Monday.

Liu forecasted that China’s GDP growth likely reached around 6.0 percent in the fourth quarter of 2019 and 6.1 percent for the whole year.