Services companies in China reported that business activities continued to cool in January which caused executives at these firms to be less confident about the outlook due to more intense competition ahead, according to an industry survey released yesterday.
The HSBC China Services Purchasing Managers' Index, a gauge of the services sector across the country, settled at 54.6 last month. It was down from 55.2 in December and was the slowest rate in four months.
A reading above 50 indicates an expansion.
Companies in the sector were also less confident about the business outlook for the rest of the year. Their degree of optimism is the fourth lowest in the survey's six-year history as they expect competition for new business to become keener this year.
"It is surprising to see the index continuing to soften to a level close to that seen during the financial crisis," said Qu Hongbin, HSBC's chief economist for China. "Policies to tighten the property market along with overall monetary tightening is likely to be the major drag on sentiment and business activities."
But Qu pointed out there should be no worries about growth due to strong consumer spending and the massive ongoing investment projects in the country.
