Services sector expansion drives recovery

China's business activity recovered further in July, with the services sector expanding at an accelerated pace due to improvements in both demand and supply, according to a private survey report.

As challenges and uncertainties remain, expanding domestic demand, particularly by spurring consumer sentiments and improving the offering of consumer goods and services, should be among the top priorities for policymakers, in order to strengthen the world's second-largest economy in the coming months, experts said.

The Caixin China General Services Purchasing Managers' Index rose to 52.1 in July from 51.2 in June, according to the report released on Monday by media group Caixin. The figure, which is above the 50-point mark that separates growth from contraction, remained in expansionary territory for the 19th consecutive month.

Citing the previously released Caixin manufacturing PMI for last month, which fell to 49.8 in July from 51.8 in June, the report noted that faster services activity growth was offset by a slower and only marginal rise in manufacturing production, with the Caixin composite PMI, which includes activity in both sectors, posting 51.2 in July against 52.8 in June.

"The services sector saw improvement, while manufacturing faced greater pressure. The former outperformed the latter in terms of supply, demand and employment," said Wang Zhe, senior economist at Caixin Insight Group. "Regarding market expectations, optimism improved compared to June, although the corresponding gauge remained at a low level."

As China's GDP growth in the second quarter slowed to 4.7 percent year-on-year, after 5.3 percent growth in the first quarter, Wang said it will be "challenging" for the country to meet its annual growth target of around 5 percent.

"The most prominent issues include the still-weak effective domestic demand and low market optimism. Therefore, policy efforts should focus on stabilizing growth, improving employment, safeguarding people's livelihoods, intensifying policy stimulus, ensuring effective implementation of previous policies, and unleashing market vitality," he said.

In its latest efforts to spur domestic demand, China announced a plan to boost consumption by expanding opening-up in the services sector, improving the supply of services and fostering new services consumption scenarios.

On Saturday, the State Council, China's cabinet, issued a 20-point guideline aimed at tapping the consumption potential, boosting new types of consumption, and strengthening the growth momentum in services spanning hospitality, elderly care, nursery services, entertainment, tourism, sports and education.

Among exports, investment and consumption, the traditional "troika" powering China's economic development, spurring consumption will be the key driving force boosting China's economic growth, said Chen Wenling, chief economist at the Beijing-based China Center for International Economic Exchanges.

To further prop up the economy, China needs to take more measures to boost consumer sentiment and confidence as well as expand consumer demand, so more efforts are needed to stabilize the job market and improve the supply-side offering of consumer goods and services, Chen told China Daily on the sidelines of a symposium organized on Monday in Beijing by Renmin University of China's Chongyang Institute for Financial Studies.

A research report, titled Decisive Battle: The Progress of China's Comprehensively Deepening Reform and High-Standard Opening-Up in the New Era and Prospects for 2029 and 2035, was released during the symposium, which took a rosy view of China's economic prospects in the years ahead. According to the report, China's new quality productive forces are poised to continue to grow in 2029, with strategic emerging industries accounting for more than 20 percent of GDP. By then, more than 40 percent of Fortune Global 500 companies will be from China.