China's services sector continued to revive in December 2023 as its yearlong recovery kept on going, a survey showed on Thursday. The Caixin services purchasing managers' index (PMI) - a private gauge - expanded at the quickest pace in five months in December to 52.9 from 51.5 in November.
The Caixin PMI surveys cover mostly small and medium-sized enterprises (SMEs) and private-sector companies. The rebound in both the services PMI and the manufacturing PMI demonstrates a continuous pickup for companies at the midstream and downstream of industry chains, and the strong momentum will persist in 2024, analysts said.
The rise in the services PMI for December was the quickest since July, an accompanying press release showed. Companies signaled a solid increase in activity and new business, with the expansion of new business at the quickest pace since May.
The gauge remained in expansion territory throughout all of 2023, signaling a sustained recovery in the services sector, Wang Zhe, senior economist at Caixin Insight Group, was quoted as saying in the press release. A reading below 50 indicates contraction, while one above 50 indicates expansion.
Wang said that both supply and demand expanded, while external demand continued its upward trajectory for the fourth consecutive month with the reading hitting the highest level since June.
SMEs are the major participants of the services sector with a relatively strong market dynamic. The continuous growth of the services PMI indicated that the recovery of the country's economy, especially the services sector, has been keeping pace, Cong Yi, a professor at the Tianjin School of Administration, told the Global Times on Thursday.
The continued growth for the PMI reading also showed market demand has been bouncing back as the services sector is the closest to the market, Cong said.
The rebound in both the services and manufacturing PMIs showed that the midstream and downstream of the country's industry chain has continued recovering, Hu Qimu, a deputy secretary-general of the digital-real economies integration Forum 50, told the Global Times on Thursday.
The manufacturing PMI for December, which was released earlier this week, hit a four-month high at 50.8.
The positive figures show that the private sector is making progress, flagging a revival for the market mechanism, Hu said. Market players are willing to rebuild their inventories, representing a further recovery of the country's economic fundamentals.
The consumption boom with bustling travel and spending during the just-concluded New Year's Day holidays was the latest example of the recovery.
During the three-day holidays, a total of 135 million domestic tourist trips were made, up 155.3 percent year-on-year, and total domestic tourism revenue reached 79.73 billion yuan ($11.22 billion), jumping 200.7 percent from the same period in 2023 and 5.6 percent from 2019 before the pandemic, data from the Ministry of Culture and Tourism showed.
Transitioning into 2024, experts are optimistic that fresh momentum will emerge amid favorable conditions and support.
"Optimism prevails in the services industry, with enterprises expressing confidence in an improved economic outlook for the coming year. This sentiment was reflected in the gauge for businesses' expectations about future activity, " Wang said.
Hu said that some concerns such as systemic risks related to the real estate sector and local debt have been eliminated, and further macro policies will be rolled out and will produce effects.
Amid the sustained recovery, experts said that challenges linger. For instance, Cong said that companies still face pressure from operating costs and uncertain external demand. More stimulus is likely to be rolled out, he said.
Favorable conditions outweigh unfavorable factors in China's development, and the fundamental trend of the economic recovery and long-term positive outlook has not changed, noted the Central Economic Work Conference, which concluded in December, the Xinhua News Agency reported.
The December meeting called for efforts to pursue progress while ensuring stability, consolidate stability through progress, and establish the new before abolishing the old, regarding the economic work for 2024.