China’s Services Sector Faces New Challenges as Growth Slows
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November Sees Drop in Services Growth Amid Economic Concerns
According to a private sector survey, China’s services sector growth slowed in November. The Caixin/S&P Global services purchasing managers’ index (PMI) dipped to 51.5, down from 52.0 in October. Although it is still above the critical 50-mark that indicates expansion, this decline highlights ongoing economic challenges, including anticipated US tariff impacts under the incoming Trump administration, as reported by Reuters.
Economic Headwinds Persist
The official PMI also reflects a similar sentiment, showing non-manufacturing activity weakened to 50.0. Throughout 2023, China’s economy has struggled with numerous issues, including a downturn in the property market, concerns over local government debt, and decreasing global demand. In response, Beijing has implemented various policy measures, such as fiscal support and monetary easing, to stimulate growth.
Uncertain Trade Environment Raises Concerns
Despite some optimism among service providers about market improvement driven by policy support, uncertainty looms over future trade conditions. Wang Zhe, a Senior Economist at Caixin Insight Group, noted, “Service providers generally expressed confidence in market improvement amid policy support, although some were concerned about the future trade environment.”
Key Indicators Show Mixed Signals
The survey reported a fall in the new business sub-index to 51.8, down from 52.1 the previous month, indicating a slowdown in new business inflows from outside China. Even so, companies have continued to increase hiring for the third straight month, and overall business confidence has climbed to its highest level in seven months. Firms have also reduced selling prices in response to competition and enjoyed lower material costs, leading to decreased average input costs.
Outlook Remains Cautious
Wang Zhe warned that while there were signs of a slight economic recovery in November, downward growth pressures still exist. He stated, “The structural and cyclical pressures facing the economy are expected to continue, coupled with the likelihood of continued accumulation of external uncertainties, which requires sufficient policy buffers.”
The Caixin/S&P Global Composite PMI, which includes both manufacturing and services sectors, rose slightly to 52.3 from 51.9, with faster expansion in manufacturing contributing to this increase.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
