China Services Sector Prints Growth

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China Services Sector Prints Growth

China'S Services Sector Prints Strong Growth In May 2024

The growth in the Chinese services sector during May 2024 surpassed the forecast, according to the PMI data. It appears that Beijing's multiple stimulus measures have benefited multiple sectors of the economy.

The Caixin PMI (Services) jumped to 54 in May against the forecast of 52.6. In addition, the 54.0 reading in May was also higher than April's 52.2 reading and shows a consistent bullish trend.

17th Month Of Consistent Growth

An improvement in the overseas and local demand was one of the key reasons for a boost in the services sector. May's reading makes it the 17th consecutive month of consistent growth in this sector.

However, the Caixin PMI showed a little picture of the economy as compared to the official data. The official PMI was released last week and showed that the growth in the services sector has slowed down in May.

The reason for the difference between these 2 readings is due to the scope & the business areas covered by the Caixin. Most of the businesses covered by Caixin are small and private, while the official PMI is made by looking at state-controlled and large businesses.

Despite the difference between the two PMIs, one thing is clear - China's policy of introducing stimulus measures has helped uplift the Chinese economy. If the current pace of growth continues, the government will be able to achieve its 5% GDP growth target.

At the same time, the data also shows that the big corporations in China are still struggling with sluggish spending & weak demand.

In the last few months, China has announced multiple stimulus packages to stimulate growth. However, it looks like the effects of these packages are still limited to some sectors of the economy.

Right now, the biggest problems faced by the Chinese economy include a property market crisis and a deflationary trend. So, unless these 2 problems are sorted out, the threats to the Chinese economy will remain real and large.

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