China services sector grows in December - Caixin

The Caixin services purchasing managers’ index rose to 53.1 from 52.1 in November, coming in above consensus expectations of 51.7. A reading above 50.0 indicates expansion, while a reading below signals contraction.

Wang Zhe, senior economist at Caixin Insight Group, said: "Supply and demand both improved. As new products helped lift the market sentiment, business activity and total new business both expanded for the fourth consecutive month. But surveyed enterprises were concerned about the disruptions caused by scattered Covid-19 flare-ups.

"Although the measure for business expectations remained in positive territory, it fell to the lowest since September 2020 and was remarkably lower than the long-term average."

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "The December bounce in the PMI marks a recovery from November’s drop, but does not return the index to its October level. New orders also recovered in December, though again not regaining their October levels, as visible in our chart below. The employment index, however, rose to its highest level since May, welcome news for China’s policymakers at a time when protests about unpaid wages have been on the rise.

"China’s biggest Covid outbreak in almost a year has seemingly done little to dampen service sector activity, based on today’s print, but may explain why activity remains subdued compared to September and October. Businesses did report concerns about Covid outbreaks, with optimism about the outlook waning; the business expectations subcomponent fell to its lowest since September 2020. The recent outbreak has been relatively geographically concentrated, which may explain the resilience of the overall survey. We still think that the spread of the virus can be expected to negatively impact economic activity in China, with January’s PMI likely to dip."