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 The services purchasing managers' index (PMI) compiled by HSBC/Markit
pulled back to 53.5 in September from a 17-month high of 54.1 in
August.
A reading above 50 in PMI surveys indicates an expansion in activity
while one below that threshold points to a contraction.
A sub-index measuring new business fell to 53.2 in September from a
19-month high of 53.9 in August, but sub-indexes measuring
employment and outstanding business both inched up, painting a mixed
picture.
"Overall, the services sector held up in September, despite the
downward pressure seen in the manufacturing sector. We think risks
to growth in the near term are still on the downside, and warrant
accommodative monetary as well as fiscal policies," said Qu Hongbin,
chief China economist at HSBC.
An official survey released last week showed that the services
sector grew at its slowest pace in eight months in September after
new orders shrank for the first time since the 2008 global financial
crisis, exposing more weakness in the world's second-largest
economy.
The services sector made up 46.1 percent of gross domestic product
in 2013, surpassing the secondary sector – manufacturing and
construction – for the first time, as the government aims to create
more jobs and boost domestic consumption.
President Xi Jinping's sustained crackdown on corruption has taken a
toll on sales of luxury goods and expensive dining.
Growth in China's retail sales during the long "Golden Week" holiday
slowed to 12.1 percent from a 13.6 percent rise in the same period
last year, data from the Ministry of Commerce showed on Wednesday.
The ministry's survey showed brisk sales of clothing, shoes,
jewelry, digital home appliances and cars.
The number of visits to major tourist sites rose but revenue from
admissions fell for the holiday week, according to China National
Tourism Administration figures on Tuesday, pointing to deeper
discounts to attract travelers.
DOWNSIDE RISKS
Last week, a pair of surveys showed China's manufacturing sector
held up in September but remained subdued in a sign that the economy
is still struggling to recover its growth momentum -despite recent
policy support.
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Steps unveiled since April included reserve requirement cuts for
selected banks and faster investment in railways and public housing.
But much of their broader impact may have been offset by a cooling
property market and tighter credit as banks grow more cautious about
lending as the economy cools.
In a bid to avert a deeper slide in the housing market, China's
central bank and banking regulator relaxed lending rules for
second-home buyers on Sept. 30 by giving them a 30 percent discount
on mortgage rates and cutting their down payment levels to 30
percent from 60-70 percent.
"We think the easing lending condition is more impactful compared
with unwinding of previous housing purchase restrictions. As such,
we expect the systemic risk arising from property sector to be
contained," OCBC said in a research note on Wednesday.
Other economists are not so sure. A glut of unsold and unoccupied
homes and buyers' expectations of further price declines could
temper any rebound.
The central bank said on Sunday it will use various monetary tools
to maintain adequate liquidity and reasonable growth in credit and
social financing. Analysts expect more policy measures will be
needed to help achieve the government's growth target of around 7.5
percent this year, although any dramatic stimulus looks unlikely as
reform-minded top leaders have shown greater tolerance for slower
growth.
The government is due to release September data on trade, bank
lending, investment and factory output in the coming week or so,
leading up to third-quarter GDP on Oct. 21
"The upcoming September data release will likely show a tentative
improvement in real economic activity, but unlikely be
strong enough to prevent full third-quarter growth from falling to
7.1 percent year on year, adding pressure on the government to
further intensify policy support," Tao Wang, China economist at USB,
said in a note.
The economy expanded by 7.5 percent in the second quarter on-year.
(Editing by Kim Coghill)
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