Domestic demand drives China's post-pandemic recovery: Financial Times
CGTN

China's services sector rebounded sharply in August, illustrative of domestic demand returning to pre-pandemic levels as the country's economic recovery continues at a faster clip, the Financial Times reported Monday.

China's manufacturing purchasing managers' index (PMI) decreased to 51 in August from 51.1 in July, with impacts from heavy floods in the south of the country, official data from the National Bureau of Statistics showed on Monday. 

But the official gauge tracking the country's non-manufacturing sector logged growth for six straight months as a reading above 50 indicates expansion compared with the previous month.

"Improved performance in the services sector suggests that China's broader economic recovery, which has been powered by state-supported industrial growth, is feeding through into businesses that were hit hard by the coronavirus outbreak and subsequent measures to contain its spread," the FT said.

The world's second largest economy's gross domestic product returned to modest growth in the second quarter of 2020 and reverted from the first contraction on record in the first quarter this year, as COVID-19 eases and policymakers announced economic packages. But concerns have lingered over continued weakness in retail spending, which "fell in July for the seventh straight month."

Iris Pang, chief economist for Greater China at ING, told the FT that a boom in domestic tourism after eased restrictions could encourage more spending on services.

China's Ministry of Culture and Tourism announced on July 15 on its website that both offline and online travel agencies can resume their services and offer trans-provincial group tours as well as flight bookings and hotel reservations, except for mid- and high-risk regions.

It provided a boost to the tourism sector and unleashed pent-up demand at a time when international travel was still heavily restricted, the FT said.

"There will be more jobs in the service sector because of this travel recovery, [and] with more jobs people will be more confident to spend," she said. "I think this is sustainable."

Besides, China's household deposits have soared this year, amounting to some 90 trillion yuan (13.1trillion U.S. dollars) in June. The level eased slightly in July but still remains way higher than the end of last year when household deposits were below 82 trillion U.S. dollars. 

The official PMI data showed the manufacturing sector also expanded in August, albeit at a slightly slower rate compared with last month. New export orders at factories remained in decline for the eighth consecutive month but the reading improved compared with July, it added.

Pang said: "The internal cycle is running, now China is waiting for the external cycle to come back. Before that, China has to rely on its own internal cycle."