China’s Services Sector Expands in October, Growth Slows

China’s services activity continued to expand in October, though at the slowest pace in three months, as holiday spending and travel provided support amid a broader economic slowdown.

The RatingDog China services purchasing managers’ index (PMI) registered 52.6, down from 52.9 in September, marking a continued expansion since the end of COVID-19 lockdowns in 2022. Any reading above 50 indicates growth. The figure slightly exceeded economists’ median forecast of 52.5. This growth in the services sector is particularly important as China attempts to rebalance its economy away from reliance on manufacturing and exports.

“A solid improvement in domestic demand continued to drive the expansion of new orders,” said Yao Yu, founder of RatingDog. However, the report also noted sustained contraction in employment and ongoing pressure on profit margins as key challenges for the sector. Officials have been focusing on boosting domestic consumption, particularly in areas like tourism and entertainment, and have outlined measures to support services providers through infrastructure development and increased lending, as detailed in China’s next five-year plan starting in 2026. You can learn more about China’s economic outlook from the International Monetary Fund.

Despite weaker momentum entering the final quarter of the year, China is still likely to achieve its approximate 5% growth target for 2024, though forecasts suggest growth may slow to around 4% in the coming quarters. Easing trade tensions with the United States, following a recent agreement between President Xi Jinping and his counterpart, are contributing to a more optimistic outlook, with some analysts, like those at Goldman Sachs, becoming more upbeat. Officials indicated they will continue to prioritize manufacturing and technology alongside services development.