China’s services sector expanded at its slowest pace in eight months in June, with confidence hitting a four-year low, according to a private-sector survey released on Wednesday. The slowdown was attributed to weaker growth in new orders, underscoring the need for further economic stimulus.
The Caixin/SP Global services Purchasing Managers’ Index (PMI) fell to 51.2 in June from 54.0 in May, marking its lowest level since October 2023 while still indicating expansion for the 18th consecutive month. The threshold of 50 separates expansion from contraction.
The survey, which primarily covers private and export-oriented firms, mirrored a broader official PMI released on Sunday that indicated the services sector saw its weakest activity in five months.
China, the world’s second-largest economy, has seen uneven growth in recent months, prompting calls for increased policy support to meet its ambitious growth target of around 5%.
The subindex for new orders declined to 52.1 in June from 55.4 in May. Overseas demand also softened slightly despite robust exports in the previous month.
Business confidence dropped to its lowest level since March 2020 amid concerns over the global economy and heightened competition. Service providers reduced hiring in June after adding jobs in May.
However, slower inflation rates for input and output prices provided some relief to business owners grappling with higher costs for materials, labor, and transport.
The Caixin/SP’s composite PMI, which tracks both services and manufacturing sectors, fell to 52.8 from 54.1.
Market attention is now focused on the upcoming third plenum leadership gathering in mid-July, where potential reforms may be announced.
According to policy advisers, reforms aimed at redistributing income from central to local governments to reduce reliance on land sales will top the agenda at the gathering.
“Fiscal and tax reforms should aim to foster more optimistic expectations among market participants,” said Wang Zhe, senior economist at Caixin Insight Group.
