China NBS non-manufacturing PMI rose to 54.4 in December
The service sector contributes about 48.2% to China’s GDP (gross domestic product). China’s non-manufacturing PMI (purchasing managers’ index) rose by 0.8 points to 54.4 in December as against 53.6 in November 2015.
Although the Chinese service sector has stayed above the neutral level, manufacturing activity has contracted. As a result, the iShares China Large-Cap ETF (FXI) and the Direxion Daily FTSE China Bull 3X ETF (YINN) fell 6.2% and 13.3%, respectively, in December.
Among Chinese companies, E-commerce China Dangdang (DANG), Baidu (BIDU), China Life Insurance Company (LFC), and Alibaba Group Holding Limited (BABA) fell 0.14%, 1.6%, 0.37%, and 0.50%, respectively, on December 31.
New orders jumped to 51.7 in December
The increase in nonmanufacturing activity in December was led by a rise in the new orders, employment, and sales price components.
The new orders index continued to stay in expansion, rising to 51.7 in December as compared to 50.2 in November 2015.
Increase in employment and sales price indexes failed to bring them out of contraction
Although the employment and sales price indexes rose in December, both components stayed in contraction. The employment component increased to 48.9 in December as against 48.8 in the previous month. The sales price component increased by 0.5 points to 48.2 in December as compared to 47.7 in November 2015.
While sales prices rose in December, input prices fell to 49.0 from 49.3 in the previous month. With the decline in input costs and the increase in sales prices, service providers may see margin expansion.
China is said to be the world’s manufacturing hub. However, recently, the contribution of the service sector has increased in China’s economy. With manufacturing struggling to rebound, the service sector may help the Chinese economy to regain strength.
India’s manufacturing sector is also slowing down. In the next part of this series, we’ll look at India’s infrastructure output.