China’s services sector grows in May despite US tariff fears: Caixin PMI

China’s services activity expanded at a slightly faster pace in May, with new orders growing more quickly than in April – though new export orders declined due to uncertainty stemming from US tariffs, a private sector survey showed on Thursday.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 51.1 in May from 50.7, remaining above the 50-mark that separates expansion from contraction.

The reading was broadly in line with China’s official survey, which showed services activity edging up to 50.2 from 50.1 the previous month. The Caixin PMI is considered a better read of trends among smaller, export-oriented firms, particularly along the east coast, while the official PMI primarily tracks large and medium-sized enterprises, including state-owned companies.

Beijing and Washington have agreed to a 90-day pause during which both would cut import tariffs, raising hopes of easing tensions. Yet investors remain concerned that negotiations could progress slowly amid persistent global economic risks.

“On the external demand front, new export orders remained sluggish in both the manufacturing and services sectors. Average costs for businesses rose slightly, but selling prices continued to weaken, increasing profit pressure,” said Zhe Wang, senior economist at Caixin Insight Group.

However, faster services growth failed to offset a drop in manufacturing production. The Caixin China General Composite PMI fell to 49.6 from 51.1 the previous month, marking the first contraction since December 2022.