Chinese economic growth remains on a 'downward trajectory'

(Photo by Rob Carr / Getty Images)
  • Non-government Caixin data showed activity in China’s services sector fell to a 10-month low in August.
  • Caixin’s head of macroeconomics said the result shows stimulus efforts by the Chinese government are “yet to kick in”.
  • It follows data on Chinese manufacturing activity on Monday which fell to a 13-month low.

Recent data prints out of China continue to point to a slowdown in growth for the world’s second-largest economy, despite efforts by policy makers to kick-start growth.

Non-government data on composite PMIs prepared by Caixin fell to a five-month low of 52 in August, down from 52.3 in July.

Composite PMI data calculates business activity levels across both manufacturing and services sectors.

Within the headline figure, the Caixin China General Services Business Activity Index fell to a 10-month low of 51.5 in August, down from 52.8 in July.

“August’s PMI readings indicated that the effects of expansionary credit policy and active fiscal policy are yet to kick in,” said Dr. Zhengsheng Zhong, Director of Macroeconomics at CEBM Group.

“Signs of stagnation emerged as upward pressure on prices remained even though demand weakened at a faster rate.”


It follows reports that the US still plans to follow up with tariffs on another $US200 billion worth of Chinese goods, as soon as next week.

New orders — a key sub-index for the near term outlook — picked up slightly from multi-year lows in the services sector, but fell in manufacturing.

“Reports from panellists indicated that relatively subdued demand conditions weighed on sales in the latest survey period,” Caixin said.

“As a result, new orders at the composite level expanded at the slowest rate in 26 months.”

Purchasing Managers Index (PMI) readings measure changes in activity levels from one month to the next.

Anything above 50 signals that activity levels are improving, and the distance away from 50 indicates how quickly activity levels are expanding or contracting.

So with an August reading of 52, China’s composite activity levels are still expanding. But the latest data continues the trend of a slowdown in recent months.

“Although overall sentiment towards the 12-month business outlook improved slightly from July’s recent low, confidence remained relatively
subdued in the context of historical data,” Caixin said.

“Notably, the level of optimism at services companies remained below the long-run series average, while sentiment at goods producers held close to June’s six-month low.”

Job creation was higher in the services sector in August, while input costs rose again for both manufacturing and services.

“The steepest rate of inflation was once again registered in manufacturing amid widespread reports of greater raw material costs,” Caixin said.

Today’s report card for China’s services sector follows Caixin data for manufacturing PMIs on Monday, which grew at the slowest pace in 13 months in August.

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