(Yicai Global) Jan. 4 -- Activity in China’s service sector in December picked up and business confidence surged to a 17-month high amid anticipation that the recent relaxation in the country’s pandemic prevention measures will support sales and boost business, according to the findings of a widely watched private survey.

The Caixin purchasing managers’ index for services stood at 48 in December, a gain of 1.3 percentage point from November, but still in negative territory, according to data released by financial media group Caixin today. A reading below the benchmark of 50 indicates contraction and one above reflects expansion.

Yet the data is more robust than that of the National Bureau of Statistics which was released earlier. The official services PMI sank 5.7 percentage points to 39.4 in December, a new low since March 2020.

Supply and demand in the service sector continued to shrink amid the Covid-19 flare-ups last month, Caixin said. However, as the country started to ease Covid controls the new orders sub-index logged a marginal improvement and the operational expectations sub-index rebounded to the highest since August 2021.

Under pressure from shrinking demand, weakening expectations and a supply shock, China’s policymakers have made it clear that priority must be given to the recovery and expansion of domestic consumption, said Wang Zhe, senior economist at Caixin.

This requires not only elevated social expectations and confidence in development, but various policies to work in tandem in stabilizing the job market and effectively increasing the disposable income of residents, he added.

The Caixin PMI for manufacturing, released on Jan. 3, dipped to 49 in December, the lowest in three months, from 49.4 in November. Again, this is stronger than the official manufacturing PMI which dipped 1 percentage point to 47, also the lowest level since March 2020.

While the Caixin composite PMI, which combines the services and manufacturing sectors, edged up 1.3 percentage point to 48.3, as the growth in services was greater than the decline in manufacturing.

Editor: Kim Taylor