- He Fan, chief economist at Caixin Insight Group
China's services sector activity grew at the slowest pace in 17 months in December, adding to signs that the world's second largest economy may be losing momentum. The Caixin services purchasing managers' index dropped to 50.2, down from 51.2 in November. A reading above the key 50-mark threshold indicates expansion of the sector, whereas one below that level points to contraction. A sub-index measuring new business dropped to 50.6 in the reported month, down from 51.1, as firms struggled with relatively subdued demand. In contrast, official services PMI for December climbed to 54.4, compared with November's 53.6. In the first three quarters of 2015, the services sector accounted for more than a half of China's GDP, up from 49.1% in the same period of 2014. China's services sector has been one of the few bright spots in the economy over 2015, helping to compensate for a persistent weakness in manufacturing. Furthermore, China's government has been trying to encourage higher consumption to rebalance the economy and replace faltering old growth drivers including heavy industry and exports.
China's economy is predicted to slow from 7.3% in 2014 to 6.9% in 2015, according to the PBoC, marking the slowest pace in 25 years. However, a number of economists believe real growth is already much weaker than official data show.
© Dukascopy Bank SA