China's services industry picks up further in October

The sector contributed to 45% of China's gross domestic output in 2012, overtook manufacturing as biggest employer in 2011

Activity in China's services sector expanded at the fastest pace in 13 months in October, offering further indications that the economy has stabilised, though activity in some important areas including new orders slowed.

The official purchasing managers' index (PMI) for the non-manufacturing sector rose to 56.3 in October from September's 55.4, the National Bureau of Statistics (NBS) said on Sunday.

"The non-manufacturing sector should continue to develop at a stable rate over the next few months, though there still needs to be more market training and promotion to further release the service sector's potential," said Cai Jin, vice-president of the China Federation of Logistics and Purchasing, which helped compile the data.

The services industry is an increasingly important pillar in China's economy as the government tries to move away from investment and exports as the main drivers of expansion.

The sector contributed to 45 percent of China's gross domestic output in 2012, and it overtook manufacturing as the biggest employer in 2011. It has weathered the global slowdown much better than the factory sector.

However, the PMI showed some areas of slowing activity, pointing to unevenness in the recovery.

The sub-index measuring new orders fell to 51.6 from a high of 53.4 the previous month, while the commercial services, the food and drinks industry and real estate sub-indices were below the 50 point line separating expansion from contraction.

GOVERNMENT CONFIDENCE

The government says its plans should lead to a firm economy, if not one that grows at the very high rates of previous years.

Speaking at a meeting of global business leaders on Saturday, President Xi Jinping said he was confident China would have healthy growth through the government's reform drive.

"We are currently changing our way of development, adjusting our economic structure, accelerating our new style of industrialisation, promoting technology, urbanisation and agricultural modernisation," state media quoted Xi as saying.

Measures to boost the service sector and to open it up to foreign competition are expected to be unveiled at a meeting of top communist party officials to be held from November 9 to Nov 12. The meeting will lay out the leadership's economic reform agenda.

"We will put forward a comprehensive plan to deepen full implementation of reforms," state media cited Xi as saying of the upcoming meeting.

Analysts expect the restructuring of the economy to a more consumption-reliant model will take its toll on headline growth figures. A recent Reuters poll sees growth moderating to 7.5 percent in the final three months of 2013, down from 7.8 percent in the third quarter.

Sunday's release of the services sector index followed the bureau's manufacturing PMI on Friday, which showed factory activity expanded at its fastest rate in 18 months in October, with strong output the main driver of the expansion.

A separate PMI survey of the manufacturing industry by Markit Economics and HSBC put manufacturing at a seven-month high.

HSBC and Markit will release their services sector PMI on Tuesday. That survey covers more smaller, private firms than the official PMI.