Chinese services feel trade heat

Business | Reuters and Avery Chen 4 Jul 2019

Reuters and Avery Chen

Growth in China's services sector slowed to a four-month low in June as new orders from overseas fell, a private survey showed yesterday, adding to signs of economy strain as the US-Sino trade war drags on.

The Caixin/Markit services purchasing managers' index fell to 52 in June, the lowest since February and down from May's 52.7. The 50-mark separates growth from contraction.

New export orders placed with Chinese services firms contracted for the first time in nine months, with companies citing subdued global demand and tariffs.

Overall, new business picked up, however, suggesting a string of government support measures for the economy over the past year were propping up domestic demand. The subindex for new business rose to 53.4 from 52.9.

"Overall, China's economy came under greater pressure in June," said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

"The conflict between China and the US impacted business confidence rather heavily. Although its impact on exports hasn't been fully reflected in the short run, the longer-term situation doesn't look optimistic," he said. "Future government policies to stabilize economic growth are likely to focus on new types of infrastructure, consumption and high-quality manufacturing."

Meanwhile, Hong Kong's GDP growth is expected to be at 1.8 percent this year, slower than the 3 percent growth in 2018 and a downward revision of a previous forecast by 0.5 percentage points, according to Hong Kong macroeconomic forecast by the University of Hong Kong.

HKU said the US-China trade tension severely dampened Hong Kong's consumer sentiment and external trade in the first half but expects it to improve slightly in the upcoming quarters.

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