China Services Growth Slows, External Risks Rise

Despite this pullback, the index maintained its position above the 50-mark for over three years, signifying expansion, as firms reported increases in both activity and new business. Domestic markets were a key driver of service sector demand, and businesses remained upbeat on the 12-month outlook, forecasting improved market conditions.

However, volatility in external demand and ongoing employment contraction are factors warranting attention, as new export orders slipped into contraction and staffing levels shrank due to cost control measures. Cost pressures, though modest, were reported by companies in the RatingDog survey, with increases in fuel, raw material, and labor costs, leading Goldman Sachs analysts to note that profit margins remained under pressure.