BEIJING (Reuters) – China’s services activity slightly expanded in February, driven by a faster rebound in demand, including export orders, a private sector survey showed on Wednesday, though an escalating U.S.-Sino tariff war has cast uncertainty over the outlook.
The Caixin/S&P Global services purchasing managers’ index (PMI), rose to 51.4 from 51.0 in January, staying above the 50-mark that separates growth from contraction.
This was in contrast with the official PMI, which showed services activity slowing to 50.0 from 50.3. The Caixin PMI is considered to better reflect the performance of more export-oriented and smaller firms.
The survey showed service sector business owners saw a modest improvement in operating conditions last month, with new business and export orders continuing to grow.
For the first time in three months, services companies increased employment, with some attributing the hiring to higher volumes of new work.
Input costs fell for the first time since June 2020, partly due to declining prices of some raw materials. This encouraged service providers to lower their prices to stimulate demand.
Business outlook for a year ahead reached a three-month high, as firms expressed optimism about stronger demand and planned to take more measures to boost sales.
Despite these positive signs, China’s economy continues to face significant challenges, including a struggling property market, weak domestic demand, fragile business confidence and rising tariffs.
On Tuesday, China imposed tariffs as high as 15% on U.S. exports, just hours after U.S. President Donald Trump signed an executive order raising tariffs to 20%.
At the annual meeting of the National People’s Congress (NPC) that began on Wednesday, China maintained its 2025 growth target of around 5%, unchanged from the target set for 2024.
The Chinese economy grew 5% last year, meeting its 2024 growth target, bolstered by a stellar export performance and the government’s late stimulus push.
Economists warn of growing headwinds this year. Nomura said in a research note that factors such as the payback of export frontloading, the loss of momentum in trade-in programmes and heightened U.S.-China tensions could weigh on growth.
Nomura expected growth to slow after the first quarter and anticipates further monetary easing, including a total of 100 basis points in reserve requirement ratio cuts and 30 basis points in rate cuts, evenly split between the second and fourth quarters.
The Caixin/S&P Global Composite PMI, which combines the manufacturing and services PMIs, rose to 51.5 from 51.1 the previous month, reflecting a modest improvement in overall business activity.
(Reporting by Liangping Gao and Ryan Woo; Editing by Jacqueline Wong)
