Both China’s official and Caixin services purchasing managers' index (PMI) rose in May. This was the first time that the Caixin services PMI rose this year, indicating that China’s economic structure continues to improve.
The data released by Caixin Media Co., Ltd. on June 5 shows that the Caixin services PMI added to 52.8 percent in May, 1.3 percentage points higher than that in April. It also marks the first gain since this year.
The movement is consistent with the official services PMI which, according to the National Bureau of Statistics, recorded 53.5 percent, 0.9 percentage points higher than a month earlier.
Service activities gained momentum in May mainly due to a faster growth in new business. As customers’ potential demands have strengthened, new orders in the service sector saw the most remarkable growth since this year.
Zhong Zhengsheng, chief economist with CEBM Research, said that the upturn in the service sector provides support for the economic performance in May, but the fast slowdown in the manufacturing sector is a concern. Whether the divergence will intensify needs further observation.
Different from the faster growth in the service sector, the manufacturing sector was weak in May. The official manufacturing PMI recorded 51.2 percent in May, in line with a month earlier; while the Caixin manufacturing PMI recorded 49.6 percent, indicating a contraction for the first time in 11 months.
Tang Jianwei, chief macro analyst with the Bank of Communications Financial Research Center, said in an interview with China Securities Journal that the weak performance of the manufacturing sector was mainly due to inadequate demands and the decline in price. Producer price index (PPI) declined noticeably in the past two months, which directly impacted the manufacturing sector.
However, Tang analyzed that “downtrend in manufacturing and uptrend in service” have maintained for last two years, suggesting that China’s economic structure is improving.
Tang said that in view of industry structure, industry’s contribution to the national economy has been declining since the 1990s, while the contribution of service has been increasing. In 2016, the contribution of industry to GDP fell to 30.7 percent, while that of service rose to 27.1 percent. The service sector will surely contribute more to the economy than industry in the future, accounting for the highest proportion of the economy.
Translated by Coral Zhong
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