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From cinemas to restaurants, China’s service sector has bounced back this year from a pandemic-induced downturn and played a greater role in sustaining the recovery of the broader economy.

The country’s service production index went up 6.8 percent year on year in August, accelerating from 5.7 percent the previous month, data from the National Bureau of Statistics (NBS) has showed. Retail sales in services surged 19.4 percent in the first eight months of the year.

“The development of the service sector emerged as an important bright spot in economic performance this year,” NBS spokesperson Fu Linghui said.

As the economy and society returned to normalcy, services stifled during the COVID-19 period posted an across-the-board recovery, significantly propping up the economy, Fu noted.

In particular, contact-based services, which had accumulated huge pent-up demand, registered stellar growth.

In August, the catering sector maintained strong momentum with combined revenue up 12.4 percent from a year ago. Earlier this month, customers scrambled for Luckin Coffee’s new Moutai latte, flavoured with China’s famous liquor, with 5.42 million cups sold on the day it was launched.

The box office saw an upswing. Sales nationwide totaled 20.62 billion yuan (2.87 billion U.S. dollars) during the summer vacation, not only a new record but also surpassing the pre-pandemic high of nearly 17.8 billion yuan in 2019.

The consumption of travel services was also resilient, said Yang Xin, an analyst with Hongta Securities, in a research note, citing vibrant August data, including rising catering revenue, surging urban subway traffic, record national railway passenger volume, and busier airline operation.

Driven by booming travel demand over the summer vacation, China’s commercial passenger volume rocketed 57.7 percent from a year earlier last month.

Online travel agency Trip.com Group said its net operating revenue in the second quarter surged 180 percent year on year with record-breaking overall hotel and plane ticket bookings. James Liang, chairman of the company, said a shift in consumers’ demand from goods to services led to resilient tourism.

Apart from the services closely related to everyday life, Fu also noted that other types, including digital economy and finance, also logged rapid expansion.

The NBS data showed its index tracking the output of the information transmission, software and IT services climbed 11.5 percent year on year in August, while that for financial services expanded 7.2 percent.

As the Chinese economy navigates the post-pandemic recovery landscape, the service sector has emerged as a powerful growth driver, contributing 66.1 percent to economic growth in the first half (H1) of the year. China’s gross domestic product increased 5.5 percent from a year ago in H1, quicker than the 3 percent expansion of 2022.

Analysts predict that the services sector will likely maintain its brisk growth in the rest of year due in part to the boost from the upcoming Mid-Autumn Festival and National Day holiday.

Data from multiple travel agencies pointed to surging travel demand. Alibaba’s travel branch Fliggy said in a report last week that orders for domestic and overseas trips during the eight-day holiday, also known as Golden Week, increased by nearly six times and over 20 times, respectively, on the platform.

Looking ahead, stable employment and improving business performance will further stimulate consumer sentiment, which, along with the effect of pro-consumption government policies, will promote steady expansion in consumption and help the economic recovery, Fu said.  

Shayne Heffernan

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