Growing service sector won't avert China slowdown

Thu Apr 3, 2014 2:40am EDT
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By Adam Rose and Xiaoyi Shao

BEIJING (Reuters) - A robust services sector will not stop China's economy from slowing into the middle of the year, analysts said after modest government stimulus was seen as a signal authorities want to steady growth to keep their reform drive on track.

Two surveys on Thursday showing growth in the service sector offered some relief after a run of disappointing data this year, but did little to alter the view that the world's second-largest economy has lost more momentum than expected in 2014.

On Wednesday, the government said it would accelerate construction of rail projects and cut taxes for small firms, the first concrete action this year to boost activity.

"The scale of the stimulus is modest, likely aimed at smoothing GDP growth at around the 7.5 percent target, rather than another round of massive stimulus," HSBC economists said in a report.

The targeted moves showed authorities wanted to stop growth falling below 7 percent without undermining efforts to reshape the economy, the economists said.

"This should buy time to implement reform measures, which could involve some short-term pain."


The official services Purchasing Managers' Index (PMI) dipped to 54.5 from February's 55.0, but still held well above the 50 level that divides expansion and contraction.   Continued...

Investors look at computer screens showing stock information at a brokerage house in Fuyang, Anhui province March 21, 2014. REUTERS/China Daily