China Services Growth Slows to Two-Year Low as Demand Weakens

China’s services activity slowed to its weakest pace in nearly two years in July, reinforcing concerns over fragile domestic demand and increasing expectations for further policy support measures.

China Services Momentum Slows

China’s services sector lost momentum in July, with business activity expanding at its slowest pace in nearly two years as weakening domestic demand and cautious business sentiment weighed on growth.

According to the latest RatingDog General Services Purchasing Managers’ Index (PMI), the gauge declined sharply to 50.4 in July from 54.1 in June. While the reading remained above the 50-point threshold separating expansion from contraction, it marked the weakest pace of growth since September 2024, signalling that the recovery in the services sector is becoming increasingly fragile.

The moderation was driven by softer gains in business activity and a noticeable slowdown in new orders. Companies reported weaker demand from domestic customers, while overseas demand remained subdued, reflecting an uneven recovery across different parts of the economy.

The latest figures also highlighted a divergence between private and official surveys. Although the RatingDog PMI continued to indicate expansion, China’s official National Bureau of Statistics (NBS) services survey pointed to contraction, suggesting consumer-facing industries continue to face significant headwinds.

Meanwhile, China’s Composite PMI, which combines manufacturing and services activity, eased to 50.8 in July from 53.6 in June. The softer reading indicates that overall economic momentum moderated during the month as both major sectors lost strength.

The latest data reinforces expectations that Beijing will maintain supportive economic policies to stabilise growth.

Policymakers are widely expected to continue implementing pro-growth measures, including additional fiscal stimulus, accelerated infrastructure investment, targeted initiatives to encourage household consumption, and further liquidity support should domestic demand remain weak.

Although China’s economy continues to expand, the slower pace of activity suggests the recovery remains heavily reliant on policy assistance. Sustained improvement in consumer spending and business confidence will likely be essential for achieving a more durable and broad-based economic recovery in the coming quarters.

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