China’s Services Sector Buoyed by Stronger Demand, Caixin PMI Shows
By Qing Na
Activity in China’s services sector expanded at a faster pace in December, buoyed by accelerated growth in demand, according to a Caixin-sponsored survey published Monday.
The Caixin China General Services Business Activity Index, which provides an independent snapshot of operating conditions in industries such as retail and tourism, came in at 52.2 in December, up 0.7 points from the previous month.
A reading above 50 indicates an expansion in activity, while a number below that signals a contraction.
The index, also known as the Caixin China services PMI, is one of the earliest available monthly indicators of business activity in the world’s second-largest economy. The services sector accounted for about 56% of China’s GDP in the first three quarters of last year, according to government data.
The official services PMI for December, released Tuesday by the National Bureau of Statistics, jumped 1.9 points from the previous month to hit 52, the highest level since March.

“Since late September, the synergy of existing policies and additional stimulus measures has continued to act on the market, producing more positive factors,” said Wang Zhe, a senior economist at Caixin Insight Group. “The economy in general remains stable, on the path to achieving the main goals set for 2024.”
The Caixin PMI survey showed that growth in both supply and demand picked up pace in December, with the latter growing at the quickest clip since July. However, external demand declined for the first time since August 2023, with the gauge hitting a two-year low.
Employment shrank fractionally. Businesses were cautious about hiring, while working to improve efficiency, according to the survey. This, coupled with rising demand, caused backlogs of work to increase for the fifth straight month and at a slightly faster pace than in November.
Downward price pressures eased. Rising prices for raw materials and higher salaries caused input costs to increase at a slightly faster pace. Service providers were able to pass on some of those costs to consumers amid improved demand, taking the indicator for output prices back into positive territory and to the highest level seen in the second half of last year.
Market optimism weakened, however. Although staying in expansionary territory, the gauge for future activity expectations dropped by more than three points from the previous month to just above September’s four-and-a-half-year low. Surveyed companies expressed concerns centering around market competition and global trade uncertainties.
The Caixin China General Composite PMI, which tracks both manufacturing and services, came in at 51.4 in December, down 0.9 points from the previous month.
Output increased in both the manufacturing and services sectors, while expansion in demand at the composite level outpaced supply for the first time in four months. Employment shrank across sectors, while price levels were weak and market optimism dampened.
China has increased efforts since late September to shore up economic growth with a slew of stimulus measures. Among these were cuts to banks’ reserve requirement ratio and mortgage rates, lower down payment requirements for buyers of second homes, and more financing for local governments to buy unsold homes and for developers to complete unfinished projects.
The measures contributed to market improvements over the past few months. However, as some of the Caixin manufacturing PMI survey’s gauges declined in December, this suggests more time is needed to assess the effectiveness of previous policy stimulus, according to Wang.
The economy still faces prominent downward pressure marked by tepid domestic demand and mounting unfavorable external factors, Wang said. “The external environment is expected to become more complex this year, requiring early policy preparation and timely responses.”
As such, he suggested that future policy efforts should focus more on increasing household income and improving people’s livelihoods, with particular attention paid to increasing socially disadvantaged groups’ ability and willingness to spend.
Contact reporter Qing Na (qingna@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
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