China services sector grows steadily as govt measures kick in

By Langi Chiang and Jonathan Standing

BEIJING (Reuters) - China's services sector grew steadily in August as domestic demand picked up, official data showed on Tuesday, adding to signs that government measures have started to steer the world's second-largest economy out of its longest slowdown.

The non-manufacturing purchasing managers' index (PMI) dipped slightly to 53.9 last month from July's 54.1 to be at the same level as in June, the National Bureau of Statistics said.

A reading above 50 indicates activity in the sector is accelerating, while one below 50 points to a slowdown.

The survey followed a pair of manufacturing PMIs which showed factory activity accelerated in August.

"The non-manufacturing sector grew steadily in August. The rise in new orders set a good foundation for growth in the next few months," said Cai Jin, a vice head of the China Federation of Logistics and Purchasing (CFLP), which compiles the index on behalf of the NBS, said in a statement.

In a nod to signals the economy may be improving, Premier Li Keqiang struck a cautiously upbeat note on Tuesday.

"China's economy has grown steadily in the first half of the year," Li told an investment forum. "And recent economic data indicates China's employment and inflation are stable."

China's economy has slowed in 12 of the past 14 quarters. In recent months, Beijing has rolled out measures to prevent growth from sliding too far, allowing it to set a base for pressing ahead with long-awaited structural reforms to move the economy off a dependence on investment, credit and exports.

These have included measures to support small businesses, which employ a large number of people, such as scrapping some taxes and making financing more easily available for them.

The NBS said a subindex of small business activities has risen for two months, without providing a specific number.

"The policies have shown their initial effects," the CFLP said, adding that "with the upcoming holidays and implementation of policies to boost the telecommunications and health sectors, the services industry will turn better in the next few months."

The subindex measuring new orders, from both home and abroad, rose to 50.9 in August from July's 50.3, while input prices and service charges fell, easing cost pressures.

But new export orders contracted, with the subindex down to 49.6 from 53.1 in July, indicating demand remains soft despite signs of recovery in the United States and Europe.

The survey, which covers 1,200 firms in 27 industries, pointed to an improving job market with the employment subindex rising to 52.5 from July's 51.3.

The services sector contributed to 45 percent of China's gross domestic output in 2012, and it overtook manufacturing as the country's biggest employer in 2011.

A separate PMI survey of the services industry by Markit Economics and HSBC will be released on Wednesday. That survey covers more smaller, private firms than the official PMI.

(Editing by John Mair)