- Hongbin Qu, chief Asian economist
China's service sector activity fell to the lowest level ever in July, underscoring threats of a slowdown in the property sector if policymakers fail to take steps. The services PMI slumped to 50.0, the threshold between expansion and contraction, down from 53.1 in June, posting the weakest reading since records began in November 2005, according to HSBC Holdings Plc and Markit Economics. Nevertheless, HSBS is said to expect that the services sector could benefit from the recovery in investment in the coming months. China's official non-manufacturing PMI index also declined to 54.2, hitting six-month low. Following the data release the Australian and New Zealand Dollars slid versus their major peers, with the Aussie losing as much as 0.9315 against the Greenback from a six-day high, while the Kiwi dropped to 0.8509.
The Chinese officials have attempted to support growth in targeted parts of the nation's economy over the last year through 'mini stimulus' measures including loosening up lending criteria for banks that are willing to provide loans to small businesses. A slowdown in the property market poses large systemic risks to the economy as the market is estimated to make up some 20% of total GDP. The market is faced with major overcapacity as property developers have been slow to react to declining demand.
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