Red Light: China’s Services PMI Signals Deceleration in Domestic Demand Recovery

The latest data from RatingDog on the General Services Business Activity Index of China (PMI) revealed a significant decline in July, with the reading dropping to 50.4 below the expected 53.7. This is the weakest level of growth since September 2024 and suggests concerns about the resilience of domestic demand recovery. The perception of this deceleration extends beyond service sectors, as manufacturing also demonstrated weak expansionary trends, reflecting a more widespread slowdown in China’s economy. While exports maintained robust momentum, matching their highest reading from last year, this external strength does not seem sufficient to offset the weakening domestic activity, raising concerns about the sustainability of growth amid global and local challenges. The continued steady expansion in the labor market, with employment extending its longest streak since 2023, adds a complex element to the economic equation, leaving economists speculating on the need for further stimulus policies.