China’s Services Activity Expands at Slow Pace

In China, an increase in the level of activity in the local sphere of services was recorded last month, the intensity of which turned out to be lower than the indicator of preliminary expectations regarding this parameter of the functioning of the corresponding area.

China’s Services Activity Expands at Slow Pace

In January, of the current year, the sphere of services of the Asian country faced such a negative reality as a decline in orders. At the same time, the very fact of an increase in activity in this case is objective and unambiguous. Currently, the world’s second-largest economy is striving to recover from the coronavirus pandemic, the echo of which continues to be a sensitive factor for this system. Currently, Beijing is facing challenges such as weak demand, which is observed, including, outside the sphere of services, and falling real estate prices.

The Caixin/S&P Global Services Purchasing Managers’ Index (PMI) fell to 52.7 in January from 52.9 in December. This indicator has continued to remain above the 50-point mark which is a kind of figure separating growth from contraction for 13 consecutive months.

Last week, it became known that activity in the factory activity in China has once again decreased. In January, the official manufacturing purchasing managers’ index (PMI) in the specified demesne rebounded slightly to 49.2, compared with a reading of 49 a month earlier. Activity in this sector has recovered but continues to be below 50, which is evidence of a decline. In the first month of 2024, Chinese industry faced problems such as restrained demand and weak consumption.

Currently, the economic system of an Asian country is an example of when there is a will to achieve a certain goal, but there are yet no opportunities or sufficient mechanisms to materialize the plan. At the same time, this does not mean that Beijing is doomed. The Chinese authorities have not yet implemented large-scale measures to stimulate the economy. It is also important that, despite the difficulties, Beijing is recording growth. In January, in Davos, Switzerland, Chinese Premier Li Qiang said that the Asian country’s economy grew by about 5.2% in 2023. This positive dynamic is expected to slow down to about 4.5%. However, these prospects provide for a continuation of the growth trend.

Currently, China’s economy is facing challenges such as persistent deflationary pressures, a housing market downturn that has turned out to be longer than initial expectations regarding the relevant situation, and local government debt demonstrating the dynamic of the increase.

Currently, the central government of an Asian country is applying a method of using public debt to finance infrastructure. In this case, Beijing is trying to stimulate economic growth. Nowadays Chinese consumers are showing caution in the context of spending issues. The corresponding sentiment was formed against the background of uncertainty about the prospects for income.

The prices charged subindex in China decreased in January for the first time since April 2022. Last month, several local companies belonging to the monitored category lowered their fees. This decision was made to gain new customers and increase sales.

Wang Zhe, senior economist at Caixin Insight Group, says that the Chinese economy is facing significant challenges, which are characterized by numerous uncertainties and adverse factors. According to the expert, the status quo of the Asian country’s economic system has yet to experience a fundamental reversal.

Wang Zhe also said that there are still opportunities for adjustments in Beijing’s fiscal and monetary policies, noting that measures in the context of relevant public administration strategies should be strengthened.

Business confidence in the Chinese services sector in January 2024 was at its lowest level in the last three months.

The Caixin/S&P composite business activity index in China fell to 52.5 last month from 52.6 in December.

Vice Minister of Finance of the Asian country Wang Dongwei said that in the current year, Beijing will continue its budget expansion. This statement, made last week, reinforced the market’s view that government spending will become the main tool of the Chinese authorities as part of efforts to accelerate economic growth.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.