Type to search

Covid’s resurgence dampens China’s services sector growth

Coronavirus’s return across many of China’s export markets saw overseas demand fall and impact its services firms’ recovery

Chinese employees work on a production line. Chinese government support is seen to exceed most other major economies.
China's support for its industries has been calculated at double the level in South Korea and four times that of the US government, according to recent data assessed in a new study. AFP file photo.

Coronavirus’s return across many of China’s export markets saw overseas demand fall and impact its services firms’ recovery


China’s services sector expansion slowed in May, with weaker overseas demand, increased costs and Covid’s return putting pressure on businesses.

The Caixin/Markit services Purchasing Managers’ Index (PMI) fell to 55.1 in May, down from 56.3 in April but still well in expansionary territory. The 50-mark separates growth from contraction on a monthly basis.

The survey attributed part of the slowing expansion to a fall in overseas demand as Covid cases abroad hurt business activity. A gauge of export orders slipped into contraction.

Also on AF: Dollar pile prompts China Development Bank $2bn onshore bond issue

The Caixin PMI contrasts with an official survey released earlier this week, which showed activity in China’s services sector expanded at a faster pace in May.

Though slower to recover from the epidemic than manufacturing, a gradual improvement in consumption has stimulated activity in China’s services sector, which includes many smaller and private companies.

Growth in total new orders slipped and services firms increased their staffing levels for the third straight month, but at a slower pace, the Caixin survey showed.

Inflation pressures worsened with input costs rising at a sharper rate in May and reports of more expensive raw materials, energy, staff and transport, the survey found.


Even though firms were able to raise selling prices for the 10th straight month, the increases have yet to catch up with the inflation in input costs.

“Services supply and demand continued their upward trends for the 13th consecutive month, though both expanded at a slower pace than in the previous month,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.

“Inflationary pressure was enormous as price gauges continued to rise. Both the measures for input costs and the prices service providers charged rose to their highest points of the year.”

The Caixin China General Composite PMI came in at 53.8 in May, weaker than 54.7 the previous month.


  • Reporting by Reuters


Read more:

China’s export hub Guangdong disrupted by power crunch, Covid

China rising: The door widens to investors


Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


AF China Bond