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China Services Activity Highlights Modest Recovery

AFP | Getty Images

Growth in China's increasingly important services sector ticked up slightly in January, the fourth straight monthly rise, adding to evidence that the recovery in the world's second-largest economy is a modest one.

China's official purchasing managers' index (PMI) for the non-manufacturing sector rose to 56.2 in January from 56.1 in December, the National Bureau of Statistics (NBS) said on Sunday.

A reading above 50 indicates growth is accelerating, while one below 50 indicates it is slowing. The bureau said the retail, air cargo and shipping sectors all reported levels of activity above 60.

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The construction sector, one of the big drivers of growth, ticked down slightly to 61.6 from December's 61.9, the bureau said in a statement.

The services sector index follows the bureau's manufacturing PMI on Friday, which eased to 50.4 in January, missing market expectations and underscoring that the economy's recovery from its weakest year since 1999 is mild.

The marginal rise in the services PMI is consistent with the view of many economists that recent data signals a modest recovery and that steady policy support may well be needed to keep it on track.

"The economy should continue to recover moderately in 1Q13 on the back of the earlier acceleration in government-led infrastructure investment and the more recent recovery of real estate investment," economists at China International Capital Corporation wrote in a note to clients after the manufacturing PMI numbers.

A Reuters poll last month showed that China's economic growth is likely to rebound to 8.1 percent in 2013 from 7.8 percent last year.

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The services sector generated 44 percent of China's GDP in 2011, up from 35 percent in 2000, and Beijing has acknowledged that greater consumer activity is needed to reduce the economy's reliance on the exports sector and investment-led growth.

The services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signalling healthy expansion and hitting a 10-month high of 58.0 in March.

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That is partly due to a maturing economy as well as a historic shift in the last decade leading a majority of Chinese to live and work in cities rather than the countryside.

The January index of expected activity remained above 60, down slightly from December but indicating that service sector enterprises continued to be optimistic, the bureau said.

Contact Asia Economy

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