China June factory, services surveys add to hopes economy may be leveling off

BEIJING - Activity in China's factory sector expanded slightly in June though not as much as expected, while growth in the services sector picked up, official surveys showed, offering some signs that the world's second-largest economy may be starting to level out after a raft of support measures.

Beijing has rolled out a flurry of steps since last year, including interest rate cuts and more infrastructure spending, but analysts remain wary about the growth outlook given the still-weak property market, erratic global demand for China's exports and fears of a collapse in Chinese stock markets.

The official Purchasing Managers' Index (PMI) stood at 50.2 in June, even with the previous month's reading, the National Bureau of Statistics. Analysts polled by Reuters had predicted it would edge up to 50.3.

"Business development momentum is still insufficient, and domestic and foreign demand remains weak," the bureau said.

With demand weak at home and abroad, factory growth remained tepid, with the reading just above the 50 point level that separates contraction from expansion on a monthly basis.

The PMI sub-index for new orders - a proxy for domestic and foreign demand - fell to 50.1 in June from May's 50.6. New export orders fell to 48.2 from 48.9 in May, indicating contraction in foreign demand for a ninth straight month.

And companies continued to shed jobs, with the employment sub-index inching down to 48.1 from May's 48.2.

A private factory survey also released on Wednesday showed activity contracted for the fourth straight month in June but at a slower pace than in May, in a further sign that the economy may be slowly levelling out. The official survey focuses on larger, state-owned firms, and the private one on small and mid-sized companies.

Services shines

Meanwhile, the official services PMI rose to 53.8 from May's 53.2, the bureau said, suggesting growth in the services industry quickened slightly in June, offsetting some of the broader economic drag from ailing factories.

The new orders sub-index of the services PMI rose to 51.3 in June from 49.5 in May and the employment sub-index inched up to 49.7 from May's 47.6 as the pace of job shedding eased.

The services sector has accounted for the bigger part of China's economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent contribution from manufacturing and construction.

The central bank cut lending rates on Saturday for the fourth time since November and trimmed the amount of cash that some banks must hold as reserves, stepping up efforts to support the slowing economy.

The government is due to release second-quarter GDP data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.

Weighed down by a property downturn, factory overcapacity and high levels of local debt, China's economic growth in 2015 is seen slowing to around 7 percent - the weakest annual expansion in a quarter of a century.