China's Services Sector Expands at Fastest Pace in One Year

China's key services sector expanded at the fastest pace in a year in October following reports of strong growth in the manufacturing sector, in the latest sign that the country is recovering after a slowdown in growth.

The country's non-manufacturing Purchasing Managers' Index (PMI) rose to 56.3 in October from 55.4 in September. A reading above 50 indicates an expansion in the sector.

China's service sector includes construction and aviation, and it represents about 43% of its overall economy.

"The non-manufacturing sector is now important in supporting the steady growth of the economy," said Cai Jin, vice-president of the China Federation of Logistics and Purchasing.

The "sector should continue to develop at a stable rate over the next few months, though there still needs to be more market training and promotion to further release the service sector's potential," Cai added.

A sub-index measuring entrepreneurs' future expectations rose to 60.5 in October, compared with 60.1 in September, indicating their greater confidence in the industry over the next three months.

Strong Manufacturing Results

The development comes after its manufacturing sector expanded strongly on the back of the country's reforms.

The final HSBC manufacturing purchasing managers' index (PMI) rose to 50.9 in October from 50.2 in September. Economists expected a reading of 50.7 for the month.

Any reading above 50 indicates expansion in the sector.

Manufacturing output increased for the third straight month and at the quickest pace since April due to strong domestic and external demand. Both new orders and new export orders rose at a faster rate in October.

The HSBC PMI broadly reflects the performance of the official PMI released earlier by the National Bureau of Statistics. The official PMI rose to 51.4 in October from 51.1 in September.

The official PMI is based on responses from bigger and state-owned enterprises, while the HSBC PMI collects responses from smaller and private sector firms.

China recovered from a growth slowdown in the third quarter, on the back of its "mini stimulus" that fuelled domestic demand to increase industrial production. The Gross domestic product (GDP) rose 7.8% year-on-year in the third quarter, up from 7.5% in the second quarter. The quarterly growth rate was the fastest in the current fiscal year.

The recovery comes after economic growth slowed down in 11 out of the 14 previous quarters.

China's cabinet had earlier reiterated that the country can meet its full-year economic growth target of 7.5% despite challenging domestic and external economic conditions.

The country's state council said that the country's progress in its economic and industrial restructuring efforts and an increase in residential income will boost the China's ability to meet growth targets.

It added that it had streamlined the administration and taken steps to liberalise interest rates and encourage trade and investment in the world's second-largest economy.