China’s services sector continued to rebound for the sixth consecutive month during October, recovering after the initial coronavirus outbreak and resultant shutdowns. The Caixin/Markit services PMI picked up to 56.8 in October from 54.8 in September, marking the fastest pace of growth in the services sector since June.

Unlike the manufacturing sector in China, the services sector’s recovery started off at a slower pace, which has gradually been picking up over the past few months. The improvement in the services sector activity was driven by an increase in domestic demand even as new export business fell into contraction at the fastest pace since July.

Hiring activity across Chinese services sector firms increased for the third consecutive month during October, with the pace of growth being the highest seen since September 2019. In a more encouraging sign, business confidence among companies also rose to the highest level in eight years.

Senior economist at Caixin Insight Group, Wang Zhe, remarks, “The second wave of coronavirus infections in Europe and the third wave in the U.S. have significantly suppressed China’s overseas demand. In the coming months, a continued recovery of the Chinese economy is highly likely, but it is necessary to be cautious about the normalisation of monetary and fiscal policies in the post-epidemic period.”