China’s services sector experienced a notable deceleration in March after reaching its strongest performance in nearly three years during February, according to new data released Friday by a private research firm.
The RatingDog China General Services index, produced by S&P Global, dropped to 52.1 in March compared to February’s reading of 56.7. Despite the decline, the figure remained above 50, indicating continued growth rather than contraction in the sector.
These findings differed from government data published earlier this week, which indicated services activity increased in March. The discrepancy stems from the surveys examining different business segments.
The world’s second-largest economy began 2024 with strong momentum, benefiting from increased exports related to artificial intelligence technology, accelerated manufacturing production, and improved consumer spending and business investment.
However, ongoing tensions in the Middle East have created uncertainty in international commerce and energy markets, potentially affecting China’s economic trajectory.
ING’s chief economist for Greater China, Lynn Song, noted in recent analysis that China appears well-equipped to handle immediate disruptions from Middle Eastern conflicts. Song cautioned that “if higher energy prices and shipping disruptions persist or worsen, we could see pressure build in the months ahead.”
The March survey revealed that new customer orders grew at their weakest rate since April 2025, while international orders declined after showing improvement the previous month.
Employment in the services sector contracted at the steepest pace in half a year, with companies attributing staff reductions to employee departures, retirements, vacant positions, and organizational changes.
Operating expenses for services companies continued climbing in March, with the cost index registering 50.7 compared to February’s 50.9. Higher fuel, materials, and wage expenses drove the increases.
The relatively modest cost pressures enabled many service businesses to reduce their prices in efforts to boost sales volumes.
While companies maintained optimistic expectations for the coming year, confidence levels decreased slightly from February’s survey results.
The combined index measuring both manufacturing and services activity fell to 51.5 in March from the previous month’s 55.4 reading.
