China services activity growth slows to 52.1 in March

Growth in the services sector of China moderated in March, retreating from a multi-year peak reached the previous month. According to the RatingDog China General Services purchasing managers index (PMI), compiled by S&P GLOBAL INC, the index dropped to 52.1 from February's 33-month high of 56.7. Despite the decline, the figure remains above the 50-point threshold, indicating continued expansion.

This private-sector data contrasts with official government figures released earlier this week, which suggested a slight uptick in services activity. The divergence is often attributed to the different sample sizes and types of businesses surveyed by the two reports. While the Chinese economy began the year with momentum—fueled by technology exports, industrial production, and retail investment—geopolitical tensions in the Middle East have introduced new risks.

China remains relatively well-positioned to endure short-term disruptions from the Iran conflict, said Lynn Song, chief economist of Greater China at ING GROEP NV, in a research note this week, adding but if higher energy prices and shipping disruptions persist or worsen, we could see pressure build in the months ahead.

The survey highlighted that new business growth reached its lowest point since April 2025, while export orders entered contraction territory. Service providers also reduced headcounts at the most significant rate in six months, citing a combination of resignations, restructuring, and unfilled roles. Average input costs in the services sector continued to rise in March, driven by higher fuel, raw materials, and labour costs. This modest increase in cost pressures allowed service providers to lower prices to help support sales. Business sentiment for the year ahead remained positive, though it eased slightly from February. The composite output index, which includes both manufacturing and services activity, fell to 51.5 in March from 55.4 in February.