China’s services sector remains in expansion but is slowing, with domestic demand supporting growth while weak exports, falling employment and price discounting point to softer underlying momentum.
Summary:
China Services PMI eases to 52.1 (prev 56.7), still expansionary
Growth slows sharply from February’s 33-month high
Domestic demand remains the key driver of activity
New export orders slip back into contraction
Employment falls for a second straight month
Cost pressures remain modest, allowing firms to cut prices
Business confidence stays positive despite softer momentum
Composite PMI also slows but remains in growth territory
Earlier this week:
China official March PMIs returned to expansionChina private manufacturing PMI in expansion for 4th straight month, but slows
China’s service sector continued to expand in March, though the pace of growth moderated notably following February’s strong performance, with domestic demand providing the primary support amid softer external conditions.
The RatingDog China General Services PMI came in at 52.1, down from February’s 33-month high of 56.7, signalling a slower but still solid expansion in activity. The sector has now remained in growth territory for over three years, reflecting a sustained recovery trend.
Incoming new business continued to rise, extending the current expansion sequence to 39 consecutive months. However, the pace of growth eased to its slowest since April 2025, suggesting a loss of momentum after the previous month’s surge. Survey respondents attributed new work primarily to stronger domestic demand, including improved customer bases and new project activity.
In contrast, external demand weakened. New export orders slipped back into contraction territory after growth earlier in the year, highlighting ongoing fragility in global demand conditions.
Despite continued increases in new business and backlogs of work, firms reduced staffing levels for a second consecutive month. Job shedding was modest but marked the quickest pace in six months, reflecting cost control measures, restructuring and the non-replacement of departing staff.
On the pricing front, the report pointed to a notably different dynamic compared with other regions. Input costs rose only modestly and remained below long-run averages, allowing firms to lower their selling prices to support demand. Output charges fell for the third time in four months, signalling competitive pressures and subdued pricing power.
Looking ahead, business sentiment remained positive overall, supported by expectations of improved market conditions and expansion plans. However, the combination of slowing growth, weak external demand and ongoing employment contraction suggests a more uneven recovery path despite continued expansion.
This article was written by Eamonn Sheridan at investinglive.com.