Index: Modest Growth in Chinese Service Activity in February

Modest Recovery in China’s Service Sector Despite Economic Challenges

Shanghai, China – Recent data shows a modest improvement in China’s service sector activity in February, driven by a rapid rebound in demand, including export orders. However, the ongoing trade war between the United States and China continues to cast a shadow over the country’s economic outlook, according to a private sector survey released on Wednesday.

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Slight Increase in Purchasing Managers’ Index

The Caixin/Standard & Poor’s Global Purchasing Managers’ Index (PMI) for the service sector rose to 51.4 points in February, up from 51 points in January. This remains above the 50-point mark, which separates growth from contraction. In contrast, the official PMI showed a slight slowdown in activity, dropping to 50 points from 50.3 points. The Caixin PMI is considered a more accurate gauge of the performance of smaller, export-oriented businesses.

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Modest Improvement in Operating Conditions and Job Growth

The survey revealed a slight improvement in operating conditions last month, with continued growth in new business and an increase in export orders. For the first time in three months, companies managed to increase employment, thanks to continued growth in new business. Data also showed a decrease in input costs for the first time since June 2020, due to lower prices for some raw materials. This drop encouraged service providers to lower their prices to stimulate further demand.

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Business Optimism Despite Ongoing Economic Challenges

Despite these positive signs, the survey showed that business expectations for 2023 reached their highest level in three months. Companies expressed optimism about future demand growth. However, the Chinese economy continues to face significant challenges, including a struggling property market, weak domestic demand, fragile business confidence, and rising tariffs.

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New Tariffs Imposed on U.S. Exports

In a further escalation of the trade dispute, China imposed tariffs of up to 15% on certain U.S. exports. This announcement came just hours after U.S. President Donald Trump signed an executive order raising U.S. tariffs to 20%. These actions coincide with the continued escalation of tensions between the world’s two largest economies.

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Sources:

• CNBC
• Reuters
• The Wall Street Journal