Workforce gravitates to services

Building Brics: The UAE's hotels and malls are seeing the benefits of China's shift away from low-cost manufacturing into a service-led economy - bringing with it a newly enriched consumer class.

China's newly enriched consumer classes - now flooding the UAE's hotels and shopping malls - are the likely beneficiaries of a boom in the Chinese service sector.

The economic slump in the euro zone has slowed the Chinese manufacturing juggernaut, leading factory workers to take higher-paying positions, economists say.

Throughout the year, purchasing managers' index data show China's service sector has consistently outperformed its larger manufacturing industries.

The sector is not immune to the country's economic slowdown. The HSBC China Services PMI fell to 52 last month from 53.1 a month earlier, hitting a one-year low.

But the service sector continues to expand and has consistently outperformed manufacturing sector PMI this year, with a reading of 47.6 last month, signalling the 10th consecutive monthly deterioration.

A PMI reading of more than 50 signals expansion; below 50 signals contraction.

"Service providers reported another month of employment growth in August. Despite accelerating to the steepest since November of last year, the rate of job creation was slightly weaker than the long-run series average," wrote economists from HSBC and Markit, which compiles the PMI data.

"In contrast, manufacturers reported the sharpest decline in employment since March 2009."

The shift partially reflects the business cycle but also shows the success of Beijing's attempts to wean its economy off manufacturing jobs and into higher-paying service sector roles, said Glenn Levine, the senior economist for the Asia-Pacific region at Moody's Analytics.

"The upturn in the services sector is real and is likely to continue over the coming decade," he said.

"A large part of China's manufacturing is export-oriented and so firms are struggling in the face of weaker demand from the US and Europe. Conversely, China's services sector is geared towards the domestic economy, where demand is still holding up reasonably well."