BEIJING (Reuters) – China’s services sector expanded at its slowest pace in eight months and confidence hit a four-year low in June, driven by slower growth in new orders, a private sector survey showed on Wednesday, suggesting more economic stimulus is needed.
The Caixin/S&P Global services purchasing managers’ index (PMI) fell to 51.2 from 54.0 in May, marking its lowest reading since October 2023 but remaining in expansionary territory for the 18th straight month. The 50 mark separates expansion from contraction.
The survey, which focuses on private and export-oriented companies, is in line with a broader official PMI released on Sunday, which showed service sector activity at a five-month low.
The world’s second-largest economy has seen mixed growth in recent months, reinforcing calls for more policy support to reach an ambitious growth target of around 5%.
The new orders subindex fell to 52.1 in June from 55.4 the previous month. Overseas demand also fell slightly, even on top of strong exports in May.
Business confidence fell to its lowest level since March 2020 amid concerns about the global economy and increasing competition.
Service providers again hired fewer staff last month, after hiring more staff in May.
But lower inflation rates for both input and output prices provided relief to entrepreneurs struggling with higher costs of input materials, labor and transportation.
The Caixin/S&P composite PMI, which tracks both the services and manufacturing sectors, fell to 52.8 from 54.1.
Markets are now focusing on a leaders’ meeting in mid-July, the so-called third plenum, where some reforms may be announced.
Measures to redistribute revenue from the central government to local governments, reducing their reliance on land sales, are top of the meeting’s agenda, policy advisers said.
“Tax and fiscal reforms should focus on creating more optimistic expectations among market participants,” said Wang Zhe, senior economist at Caixin Insight Group. (This story has been corrected to set the confidence milestone at a four-year low, in paragraph 1.)
(Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes)
