Experts: China's shifting focus towards domestic demand

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China Caixin services purchasing managers' index (PMI) on Wednesday showed growth slowed in June, as new order volumes weakened, although it continued to keep a rising demand.

Caixin PMI fell to 51.6 in June from a four-month high of 52.8 in May. It was the second-lowest reading in 13 months, although still well above the 50 line that divides expansion from contraction.

Levels above 50 signal an expansion, while levels below 50 indicate contraction.

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Caixin PMI was less enthusiastic than the official services PMI for June, released last week, which rose to 54.9 from May's 54.5.

In terms of scope, Caixin PMI tends to focus on smaller, private companies, while the official data tends to focus on larger, often state-owned companies.

Donna Kwok, senior China economist at UBS, told media that, she wasn't worried about the services PMI decline. She noted that as a sentiment indicator, PMI tends to fluctuate month-to-month, but it remained in a range "comfortably" over 50.

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"For the Q2, we've got a still solidly humming economy at play," she said, forecasting second-quarter economic growth at 6.8 percent.

While the manufacturing PMI data tends to be more closely watched, China's pivot toward domestic consumption and away from investment-led growth means the services sector accounts for a bigger slice of the mainland economy. The services sector includes consumer industries such as real estate, retail and leisure.

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The Caixin China Composite PMI, which includes both manufacturing and services, slipped to 51.1 in June, from May's 51.5, the slowest expansion in a year.

Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group, said that the manufacturing recovery is unsustainable and is insufficient to put the brakes on a slowdown in overall economic growth.

“Even though the impact of slowing expansion in China’s services sector was cushioned by a slight rebound in manufacturing activity, the downward trend in the economy remains entrenched,” he said in a statement to release the services index.

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