* Official services PMI rises to 55.5 from 53.7 in Sept
* Reinforces signs that the worst is over for economy
* Construction, retail activities regain steam
By Kevin Yao and Wan Xu
BEIJING, Nov 3 China's services sector rebounded
in October from a two-year low in September on stronger activity
in the construction and retail sectors, an official survey
showed on Saturday, adding to signs of a modest economic
The official purchasing managers' index (PMI) for the sector
rose to 55.5 in October from 53.7 in September, according to the
latest survey from the National Bureau of Statistics.
The sub-index for the construction services sector rose to
60.2 from 58 in September while the sub-indices for activities
in the sectors of retailers, hotels, environmental protection
and public utilities all stayed above 60, the bureau said.
But the new orders sub-index for the services sector as a
whole eased to 51.6 in October from 51.8 in September, it said
The Services PMI reading in September was the lowest in
nearly two years, although the sector remains above the 50-point
line that divides expansion from contraction.
The central bank has been steadily easing policy to boost
credit while the National Development and Reform Commission
(NDRC), the top economic planning agency, has been fast-tracking
infrastructure projects to boost investment.
China's central bank said in a policy report published on
Friday that it will prioritise supporting the economy above
other needs, affirming expectations that the recovery in the
Chinese growth engine is feeble at best.
The property sector has showed signs of warming up in recent
months due to policy easing and support from local governments.
The services sector index follows two manufacturing PMI
surveys that showed the economy may be regaining some steam in
October following a series of policy steps..
"Overall, we can say that recent government stimulus steps
have started to gain some traction," said Hua Zhongwei, senior
economist at Huachuang Securities in Beijing.
"This is a positive sign which shows that increased
investment is boosting demand for related services."
China annual GDP growth is expected to accelerate to 7.6
percent in the next quarter from 7.4 percent in the third
quarter, snapping a seventh straight quarter of slower expansion
and paving the way for beating the full-year target of 7.5
A similar survey of China's services sector will be released
by HSBC on Monday.
China's services industry, which covers everything from
banks, restaurants to Internet firms, has weathered the global
slowdown much better than the factory sector, with the PMI
consistently signalling healthy expansion.
China is already the world's manufacturing hub after three
decades' breakneck growth, but its services sector is relatively
underdeveloped, making up just 43 percent of GDP, compared with
more than 70 percent in Western economies.
China aims to boost the share to 47 percent of GDP by 2015
as it tries to wean the economy away from polluting and
energy-guzzling industries towards services and domestic
The government has expanded a pilot reform to replace
business tax with value-added tax (VAT) from Shanghai to 10 more
provinces and cities to ease tax burdens for the transport
sector and some other services industries.
Beijing has been following a programme of pro-growth fine
tuning of economic policies for a year and analysts broadly
expect that to remain in place when a new leadership line-up of
the ruling Communist Party is unveiled at a Congress this month.
The fine tuning includes two interest rate cuts, three
reductions in the portion of deposits banks must keep as
reserves (RRR) - freeing an estimated 1.2 trillion yuan ($190
billion) for lending.
The central bank has been relying on cash injection via its
open market operations in recent weeks to boost bank credit. The
record injection this week roughly matches the additional
liquidity provided by a RRR cut.