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China's Services PMI Hits 7-Month Low of 50.7 in April Amid US Tariff Tensions

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Updated May 6, 2025, 08:09 AM

China's services sector experienced a slowdown in April, with the Caixin Services PMI dropping to a 7-month low of 50.7 from 51.9 in March, marking the lowest level since September 2024. This decline reflects the impact of escalating trade tensions with the United States, as new business growth slowed and business sentiment reached its lowest point since February 2020. The PMI has remained above the boom-bust line of 50 for 28 consecutive months.

The Caixin Composite PMI also fell to 51.1 from 51.8 in the previous month, indicating a broader slowdown in both manufacturing and services sectors. The services sector's contraction is attributed to a marginal increase in new business, influenced by recent US tariff announcements, which have also led to a continuous decline in employment for two months. Wang Zhe, a senior economist at Caixin Insight Group, noted that new export orders declined at the fastest rate since July 2023, while manufacturers continued to absorb existing orders, keeping output in expansionary territory for the 18th consecutive month.

The slowdown in China's services activity raises concerns about a potential rapid economic slowdown in the second quarter, following a strong start to the year. Analysts are watching closely to see if policymakers can stimulate consumption to offset the expected decline in export demand due to US tariffs. The National Bureau of Statistics reported a non-manufacturing PMI of 50.1 in April, down from 50.3, while the manufacturing PMI slipped to 49 from 50.5. Bloomberg's survey of economists forecasted a GDP growth deceleration to 4.2% this year, below the official target of around 5% reaffirmed by Finance Minister Lan Fo’an. Goldman Sachs estimates that 16 million people, or more than 2% of the labor force, may be exposed to US-bound exports. The official non-manufacturing PMI came in at 50.4 in April, slightly below the consensus forecast of 50.6.

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