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What Does China’s Services PMI Indicate?

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China’s services PMI

According to a report by Markit Economics, Caixin China’s services PMI (purchasing managers’ index) stood at 52.4 in October 2016 compared to 52.0 in September. The stronger number as compared to September indicated business activity in the country is rising. The new export order and production volumes grew the most since June 2016.

China’s manufacturing PMI also showed a stronger move in October 2016. It stood at 51.2 in October 2016 as compared to 50.4 in September, beating market expectations. The manufacturing PMI showed a stronger move in October, its highest reading since July 2014.

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Economic impact

The Chinese economy has depended primarily on manufacturing and exports for a long time, but this is starting to change. China is shifting toward a consumption-based economy from a low-cost manufacturing hub.

According to McKinsey’s China Consumer Report, Chinese (ASHR) (MCHI) consumers are becoming more selective about where they spend their money. They’re shifting their focus from products to services and from mass to premium segments. This change shows that the economy is transitioning. This transition will support the service industry. As China (FXI) (YINN) is an important trading partner for countries around the world (ACWI), an improvement in its economic condition is a positive sign for the global economy.

You may also be interested to read, Ray Dalio Predicts ‘Dangerous Situation’ in the Debt Market.

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