China’s Services Sector Growth Underwhelms Amid Economic Downturn


  • The service sector in China grew at a slower rate than anticipated in February, despite the Lunar New Year holiday stimulus, as per findings of a private survey.
  • The service sector Purchasing Managers Index (PMI) rose to 52.5, falling short of anticipated climb to 52.9, decelerating from January’s 52.7.
  • Locally, demand remained weak, negating the rise in international orders; higher input costs transferred to customers adversely impacted demand further.
  • The Chinese government employed a myriad of monetary stimulus moves over the past year to counteract the pandemic-hit economy’s effects, but the economy saw only limited support.

Sluggish Rise in Service Sector

The latest data indicates minimal growth in China’s service sector in February, a disappointing insight from a private survey released on Tuesday. Despite the activity increase usually prompted by the Lunar New Year holiday, the nationwide broader economic downturn overshadowed the expected surge.

PMI Summary

To put it in numbers, the Purchasing Managers Index (PMI) for services rose to 52.5 in February. This fell short of the predicted 52.9, marking a slow-down from a slightly loftier 52.7 in January.

Weak Local Demand versus Rise in Overseas Orders

One of the main factors hindering growth is the weak local demand, which largely counteracted the uptick in foreign orders. The Caixin report also disclosed that increased input costs were transferred to the consumer, exacerbating weak demand.

Implications for Broader Chinese Economy

This marks a back-to-back month of below-consensus growth according to the Caixin report. This could indicate a potential slow-down in service activity as the general Chinese market tempers down.

Official data unveiled last week showed little-to-no improvement, with much of the activity nearing contraction.

Service Sector: A Silver Lining

However, there are glimmers of hope. The service sector seems to be one of the few consistently expanding sectors in the sluggish Chinese economy. The most recent Caixin data revealed a 14-month stretch of growth in this sector. This happens even amid the broader economic downturn.

Government Intervention

Over the last year, the Chinese government has taken measures to stimulate the economy reeling from the COVID-19 pandemic’s impacts. These efforts, however, offered minimal solace to the economy, according to reports.


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