China’s Services Sector Activity Improves, But Still in Contraction
Chinese services sector witnessed a slight improvement during March from the previous month, but remained in contraction as a result of the coronavirus crisis driving lockdowns and impacting domestic demand as well as operations. The Caixin services PMI rose to 43 in March from a record low reading of 26.5 in the previous month, but remained below the 50-threshold indicating contraction.
This was the second weakest PMI reading for the services sector since in nearly 15 years. The weak numbers raise concerns that it will take longer for the services sector, which accounts for 60% of the country’s GDP, to bounce back even as authorities lift lockdowns and restrictions and Chinese offices resume normal operations.
Companies in the services sector cut selling prices for the fourth consecutive month in a bid to entice consumers and increase sales. However, the outlook for the next 12 months remain pessimistic as businesses worry about how long the impact of the pandemic would last.
Even though some restaurants, malls and movie theaters have reopened recently after being shut to contain the spread of the virus, social distancing norms and an apprehension among consumers are keeping capacity under control. Even after the number of domestic cases of coronavirus were brought under control, China remains at risk for a second wave of infections from imported cases as travel restrictions are being lifted.
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