BEIJING China's services activity shrank in December as surging COVID infections hit demand, according to a private sector survey on Thursday, although business confidence rose to a 17 month high.
The PMI for Caixin S&P Global services purchasing managers increased to 48.0 in December from 46.7 in November, but remained below the 50 point mark, which indicates contraction in activity for a fourth straight month.
After rare public protests over the protracted curbs, China removed its stringent zero-COVID strategy in early December, triggering a surge in COVID infections across the country.
The companies in the Caixin S&P survey reported the fall in output and new work for the fourth month in December, and external demand fell into contraction due to growth the previous month.
The lifting of COVID restrictions could lead to increased consumption, with the confidence index rising to a 17 month high, despite the fact that firms were bullish about recovery prospects for the next 12 months.
In December, companies cut staff and raised prices, while input cost inflation softened.
Chinese leaders pledged to focus on stabilising the economy in 2023 and to increase policy adjustments in order to cushion the impact of COVID infections at a time when a weak global economy is hurting exports.
According to Wang Zhe, senior economist at Caixin Insight Group, this requires not only increased social expectations and confidence in development, but also various policies to work together in stabilising the job market and increasing the disposable income of residents.
Caixin S&P's composite PMI, which includes both manufacturing and services activity, rose to 48.3 in December from 47.0 in the previous month, remaining in contractionary territory for the fourth consecutive month.
The PMI of Caixin was compiled by S&P Global based on responses to questions sent to purchasing managers in China.