China’s Services Activity Expands at Fastest Pace in Seven Months

BEIJING (Reuters) – China’s services activity expanded at the fastest pace in seven months in December, driven by a surge in domestic demand, but orders from abroad declined, reflecting growing trade risks to the economy, a private sector survey showed on Monday.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 52.2 in December from 51.5 the previous month, marking the fastest growth since May 2024. This figure surpasses the 50-mark that separates expansion from contraction on a monthly basis.

The findings align with China’s official PMI released last week, indicating non-manufacturing activity recovered to 52.2 from 50.0 in November.

China’s economy has struggled over the past few years due to weak consumption and investment, along with a severe property crisis. Exports could face more U.S. tariffs under a second Trump administration.

To revitalize the faltering economy, authorities introduced a slew of fiscal and monetary measures in recent months. Wang Zhe, Senior Economist at Caixin Insight Group, noted: “Since late September, the synergy of existing policies and additional stimulus measures has continued to act on the market, producing more positive factors.”

The survey showed the new business sub-index rose to 52.7 in December from 51.8 in November. However, new business inflows from abroad fell for the first time since August 2023.

Companies reduced staff for the first time in four months, with some citing cost concerns, including rising input material prices and wages.

Wang pointed out that notable downward pressures persist with soft domestic demand and growing external factors: “The external environment is expected to become more complex this year, requiring early policy preparation and timely responses.”

Business confidence remained positive but dipped to the second-lowest since March 2020, with some companies expressing concerns over rising competition and potential international trade disruptions. Donald Trump, who will take office for a second time as U.S. president in January, has vowed to impose tariffs exceeding 60% on Chinese goods, posing a significant risk for the world’s second-largest economy.

The Caixin/S&P Global Composite PMI, combining the manufacturing and services PMIs, declined to 51.4 from 52.3 in November.