China’s Caixin services PMI for July improved further at 55.5 which came higher than the consensus forecast of 48.0, showing that the country’s services activity expanded at the fastest pace in 15 months.
This encouraging July survey data signaled a further recovery in Chinese services activity amid looser pandemic restrictions and the return to more normal business conditions.
“Supply and demand in the services sector expanded. Although Covid restrictions hurt the businesses of some service companies, the economic fallout from this round of outbreaks was fading. Gauges for business activity and new business were both in expansionary territory in July, hitting their highest readings in 15 and nine months respectively,” Wang Zhe, Senior Economist at Caixin Insight Group said.
“The pandemic situation overseas restricted external demand, with the measure for new export orders in contractionary territory for the seventh straight month,” Wang added.
Central Government’s Support
“The nation’s service sector has been on the recovery track over the past two months, and activity in all the surveyed service sectors shows growing confidence among businesspeople,” Zhao Qinghe, a senior statistician with the NBS said in a statement.
The central government has come up with various policy measures to support companies in the services sector, especially catering, tourism, culture and transportation, which have been hit hard by the surge of COVID-19 outbreaks in parts of the country since March.
A State Council executive meeting chaired by Premier Li Keqiang on Friday reiterated the need to support struggling industries, including catering, retail, tourism and transportation, as policymakers pledged to extend extra value-added tax deductions in the services sector.
Key measures that have already been rolled out include offering tax refunds and fee cuts to businesses, deferring their social security payments and encouraging State-owned housing authorities to reduce or exempt rent for micro and small businesses.
According to the State Taxation Administration, China had offered a total package of over RMB 3 trillion to support those measures by July 20.
Under a policy document jointly issued by six central government departments, smaller firms in the service sector that are tenants of State-owned houses in areas classified as medium- and high-risk for COVID-19 will enjoy a six-month rent exemption this year, while those in other areas will be exempted from paying rent for three months.
