The Daily Update - China PMI / 13th National People's Congress

The services sector in China expanded at the slowest pace in four months in February, suggesting slowing growth in demand across the services industry, although the reading was largely in-line with those of an official gauge of the non-manufacturing sector released last week. The Caixin/Markit services purchasing managers' index (PMI) fell to 51.1, the lowest since October and down sharply from January's 53.6. The Chinese government is hoping a stronger services sector will cushion a slowdown in its huge manufacturing industry that is being hit by not only the U.S.-China trade war but also rising labour costs.

Opening today, we also have the second session of the 13th National People's Congress, where policy and planning discussions will take place for the next 10 days setting the country's goals for 2019. When reviewing the government's work in 2018, Chinese Premier Li Keqiang said GDP grew by 6.6 percent, exceeding 90 trillion yuan, CPI rose to 2.1%, and the country's ‘three tough battles against poverty, pollution and major risks got off to a good start in 2018. This year China expects its GDP growth to be in the range of 6 to 6.5 percent, aiming to maintain a consumer inflation level of around 3 percent as well as creating more than 11 million new urban jobs. The government report released to coincide with the opening stated ‘The above-projected targets are ambitious but realistic—they represent our aim of promoting high-quality development, are in keeping with the current realities of China's development and are aligned with the goal of completing the building of a moderately prosperous society in all respects’.

Premier Li also emphasised China’s commitment to prevent and control pollution and boost environmental protection, telling the congress strong action will be taken to treat three major sources of pollution, coal, motor vehicles and industrial production. ‘This year, sulfur dioxide and nitrogen oxide emissions will be cut by three percent’ Li said ‘Green development is a critical element of modernising an economy and also a fundamental solution to pollution’.

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