China's manufacturing still contracting in November but service activities climb

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The pace of contraction in China's manufacturing sector slowed in November and the services sector grew, signs that the country's transition to a consumption-driven economy is back on track after a torrid summer, surveys showed Tuesday.

According to the final Caixin/Markit China Manufacturing Purchasing Managers Index, China's manufacturing activity contracted for the ninth straight month in November, but more slowly than in October.

The private survey had a reading of 48.6 for November, up from 48.3 in October. Economists had expected the final November reading to be flat on October.

A reading above 50 indicates an expansion in activity, while one below point to a contraction.

Unlike the government's gauge that concentrates on large firms, Caixin's survey focuses on smaller and medium-sized companies.

China's official manufacturing purchasing managers index, released 45 minutes earlier than the Caixin survey results, came in at 49.6 - slightly lower than October's 49.8, according to data released by the National Bureau of Statistics.

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The official figure also missed an economist poll by Reuters that expected a reading of 49.8.

This is the official measurement's fourth straight month of contraction, taking the reading to a three-year low and fueling persistent concerns about sluggish growth in China despite a long series of stimulus measures, including six interest rate cuts since November 2014.

The official services sector PMI performed better however, with a reading of 53.6 - slightly higher than October's reading of 53.1, allaying some worries about the slowdown in the world's second-largest economy. The services sector is the biggest contributor to the GDP.

The rise in the services sector is likely to have been driven by online sales over Singles Day on 11 November, said Nomura in a note.

While weak foreign demand is still weighing on China's manufacturing activity, the rest of the economy appears to be holding up "reasonably well," said Capital Economic's China economist, Julian Evans-Pritchard in a note.

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"Overall, the official PMIs paint a nuanced picture. On the one hand they point to continued weakness in manufacturing which looks to have remained a drag on growth last month. On the other hand, there are some hints that accelerating credit growth and fiscal spending, on the back of recent policy easing, may have continued to support investment growth last month," added Evans-Pritchard.

Some see the slowdown in China's manufacturing activity as an inevitable step in the economy's transition.

"The China slowdown basically feels really bad for the rest of the world and it's going to continue to feel bad. That's structural, that's not changing. Everyone is focused on the manufacturing side, the old world, we need to shift gears...and services is all that matters today," Hayden Briscoe, Director of Asia-Pacific Fixed Income, at AllianceBernstein told CNBC Squawk Box.

"People are still buying, they are still in the services jobs, there are more and more (such) jobs being created," Briscoe said.

Last week, Chinese premier Li Keqiang said the country was on track to hit its growth target of about 7 percent this year.