China’s services sector activity continued to expand for a second consecutive month in February, indicating a rebound in the country’s economy after the pandemic. This was revealed by a private survey on Friday, which showed that the Caixin China General Services Purchasing Managers’ Index (PMI) rose to 55 in February from 52.9 in January, marking a new high not seen since August.
The Caixin China General Services PMI focuses more on small and medium-sized enterprises and exporters. The report noted that the recovery in services was due to the easing of pandemic-related restrictions and reduced disruptions to operations. It added that companies frequently linked the expansion in activity and improvement in demand to the same.
The subindex for new export orders further improved in February and remained in expansion territory, hitting the highest level since April 2019. This was attributed to a recovery of external demand.
Notably, the rebound in supply and demand conditions led to a strong increase in employment, as services firms have taken on additional workers for the first time in four months. The gauge for employment came in above 50, marking an end to a three-month contraction and hitting the highest reading since November 2020.
According to the report, business confidence across China’s services sector remained robust in February, despite the degree of optimism slipping slightly from January’s near 12-year high. Services firms expect that the further normalization of activity and a further recovery in customer demand will help drive activity levels higher in the months ahead.
While the country’s economy is entering a post-pandemic recovery after China optimized its COVID response, the impact of the pandemic remains far-reaching. Some SMEs still face pressure and challenges from insufficient demand, high costs of raw materials, and financing difficulties. Zhou Maohua, a macroeconomic analyst at China Ever-bright Bank, warned that the government needs to further implement stimulus policy measures to ease burdens and stabilize growth, ensure stable prices and supplies of energy and raw materials, and tackle issues faced by SMEs.