China’s services industry experienced its most robust expansion in nearly three years during February, according to a private sector analysis released Wednesday from Beijing.
The RatingDog China General Services PMI, produced by S&P Global, jumped to 56.7 last month, up from January’s 52.3 reading. This marks the strongest performance since May 2023, with any figure above 50 indicating growth rather than decline.
This surge was fueled by stronger customer demand, including a notable increase in international orders, though escalating expenses drove service prices to their highest point in 21 months.
When combined with manufacturing data, the services performance points to promising signs for some Chinese businesses as the year begins. However, ongoing structural problems, trade disputes, and global political tensions continue to pose significant threats to future growth.
These findings stand in sharp contrast to government data released the same day, which indicated non-manufacturing sectors actually shrank for the second consecutive month in February.
The Composite Output Index also demonstrated strength, climbing to 55.4 in February from January’s 51.6, representing the fastest growth rate since May 2023 as both manufacturing and services sectors accelerated.
Chinese government officials have committed to strengthening domestic consumer spending in services while addressing persistent overcapacity issues. There are growing concerns that last year’s export surge, which helped shield the economy from U.S. tariff impacts, may not continue.
“External uncertainties and the current softness in employment may constrain the sustainability of this improvement to some extent. The Services PMI is expected to maintain its expansionary trend in the short term,” stated Yao Yu, Founder at RatingDog.
Fresh business orders increased at their fastest rate in six months, boosted by domestic marketing campaigns and growing customer inquiries. International demand expanded at its quickest pace in twelve months.
However, service companies cut their workforce numbers in February following a modest hiring increase at year’s start, citing the need to control expenses. This staffing reduction led to increased work backlogs.
Financial pressures also mounted, with average operating costs climbing faster than the previous month due to higher labor and energy expenses. Companies responded by raising their service prices as customer demand strengthened, reaching the highest pricing level since May 2024.
While business optimism showed slight improvement in February, companies expressed ongoing worries about fierce market competition.
