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With the Euro crisis and a weak US economy causing ripples around the world, China is not immune. For the first time in several years, China's growth is showing signs of cooling-off—even contracting in some sectors. Here's more on the story.
Key financial indicators are showing signs that China's service sector is slowing down. It follows an overall decline in construction and manufacturing. HSBC services released its purchasing managers index (PMI) numbers on Monday, showing China's service sector dropped from 54.1 to 52.5 in November.
The index showed a contracting trend for China's non-manufacturing sectors, rated at 49.7 for November. Economists believe the losses in the non-manufacturing sectors have followed a general cooling-off of China's manufacturing sector—a situation that has left Chinese consumers with less cash to fuel the retail and services economies.
Investors are looking to Beijing and China's central bank for fiscal policies that would reverse the cooling trend. This is what Standard Charter Bank's Stephen Green thinks we should expect:
[Stephen Green, Head of Greater China Research, Standard Chartered Bank]:
"More easing. I think it's likely we'll get least another couple of reserve requirement cuts after the first one in November 2011. I think also it's possible we'll get a bigger loan quota for next year."
Inflation numbers are also due out in the next week or so. They are being closely watched by all parties vested in the world's second largest economy.
Inflation is directly related to individual consumers' buying power and the health of the economic sectors—like retail and services—that are driven by it.