Economic Buzz: China?s services growth hits near three-year high as composite PMI strengthens

China?s services sector grew at its fastest pace in almost three years in February, according to the latest PMI data. The Caixin China General Services PMI rose to 52.6 from 51.0 in January, signalling a solid expansion in business activity. Stronger domestic demand and improved overseas sales supported the upturn, with new business increasing at one of the quickest rates since mid-2024. New export orders expanded at the fastest pace in a year, helped by better tourism activity and marketing efforts.

Higher new orders led to a modest rise in outstanding business. However, with limited pressure on capacity, companies reduced staffing levels after a slight increase at the start of the year, partly to manage rising costs.

Input prices increased at a faster rate, mainly due to higher wage and energy expenses. In response, service providers raised their selling prices for the first time in three months, with output charge inflation reaching its highest level since May 2024.

Stronger services activity, together with manufacturing growth, pushed the Caixin China Composite PMI up to 52.5 from 51.1 in January, indicating a solid improvement in overall private sector conditions. Business confidence strengthened, supported by better demand and expansion plans, although competition remained a concern.

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