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September 23, 2017

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HSBC's China services PMI recovers to 54.3 after one-year low

BEIJING -- China's services sector rebounded in September after its growth hit a one-year low in August, according to a private sector survey on Monday that follows last week's much more gloomy official assessment.

The HSBC services sector Purchasing Managers' Index (PMI) rose to 54.3 in September from 52 in August, rebounding to its highest level since May thanks to an uptick in the new business subindex to 54 — also the highest level in four months.

The sunny results are in marked contrast to an official non-manufacturing PMI released on Oct. 3, which showed activity in September slowing to the weakest level since November 2010. The official survey, published by the National Bureau of Statistics, tends to reflect larger state-owned firms, and the two do not necessarily move in tandem.

Monday's survey also contrasts with both the HSBC and the official PMI ones of China's vast manufacturing sector, which indicate that China is headed for a seventh straight quarter of slowing growth.

"This is likely an indication of a gradual improvement of domestic economic conditions due to the earlier easing measures and the stronger consumption demand in the run-up to the Golden Week holiday," said Hongbin Qu, HSBC's chief economist for China.

"While this helped to cushion the ongoing slowdown of manufacturing sectors, a meaningful turnaround in domestic demand requires additional easing efforts."

The weeklong National Day holiday at the beginning of October saw hundreds of millions of Chinese hit the roads and shopping malls, straining capacity at tourist destinations and crowding trains and airports. This year, the holiday coincided with the Mid-Autumn Festival, when families and business contacts treat each other to restaurant meals, mooncakes and gifts.

HSBC's "prices charged" subindex rose above 50 — the line that separates expansion from contraction — for the first time since March. The rise could reflect the holiday as well as reflecting an increase in inflation after a summer trough.

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