Service index shows signs of stabilizing economy

China's service sector expanded in November at the fastest pace since March as corporate confidence improved with a substantial increase of new orders, a private business survey showed on Wednesday.

Analysts said the stronger performance of the service sector adds to the evidence that the Chinese economy is stabilizing and that the sector, which already accounts for more than half of China's GDP, will continue as a key growth driver in 2020.

The Caixin China General Services Business Activity Index rose to a higher level than in each of the preceding seven months — 53.5 in November, up from 51.1 in October. The indicator for new export orders rose to a four-month high while overall new business also rebounded from the previous month with improved external and domestic demand, according to a survey jointly released by media group Caixin and information provider IHS Markit.

Surveyed companies said they planned to expand their business with new projects in the pipelines, and the overall demand in the service sector has improved. The gauge for employment slightly weakened from the previous month but remained in expansionary territory, according to the Caixin survey.

The Caixin service industry reading was the same as the official nonmanufacturing purchasing managers index released by the National Bureau of Statistics on Saturday, which also suggested activity expanding in November.

Mao Zhenhua, founder and president of China Chengxin International Credit Rating Co, said that the service sector will continue to be a major driving force of China's GDP growth next year.

Favorable policies can be expected to support employment in the sector while manufacturing may face expansion pressure due to excess capacity.