China December HSBC services PMI falls to lowest in over 2 years

Growth in China's services sector slowed sharply in December to its lowest point since August 2011, a private sector survey showed on Monday, adding to signs of slowing momentum in the world's second-largest economy.

The HSBC/Markit services sector Purchasing Managers' Index (PMI) dropped to 50.9 in December from 52.5 in November, with new business expansion the slowest in six months.

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The PMI follows a similar survey by China's National Bureau of Statistics on Friday, which also noted a slowdown in service-sector activity growth to a four-month low of 54.6.

This picture taken on November 16, 2013 shows workers sewing in a clothing factory in Bozhou, east China's Anhui province.
STR | Collection | Getty Images

Both surveys follow two other PMIs last week that showed China's factory activity slowed in December, suggesting the moderation in the country's growth in the final quarter of 2013 was broad-based.

But all four measures remained above the 50 point level that separates expansion in activity from contraction.

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China's economy has regained some momentum since mid-year after a protracted slowdown. While it was expected to lose steam as the effect of government support measures faded, activity has remained resilient into the December quarter.

Beijing has said it will accept slower growth as it tries to reshape the economy towards more sustainable growth, based on consumer demand, after three decades of breakneck expansion led by exports and credit.

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China's economic growth is likely to come in at 7.6 percent in 2013, the government has said, just above the official target of 7.5 percent and slightly below the 7.7 percent in 2012.

"We expect the steady expansion of manufacturing sectors to lend support to service sector growth," said HSBC's China chief economist Qu Hongbin.

"Moreover, the implementation of reforms such as lowering the entry barriers for private business in service sectors and expanded VAT reforms should help to revitalize service sectors in the year ahead," Qu said.

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The HSBC services PMI's sub-index measuring new business orders dropped to a six-month low of 51.8 in December on subdued client demand.

However, labor market conditions improved for the fourth consecutive month, with the employment sub-index growing at the strongest pace since June, mainly due to company expansions, the PMI showed.