China’s services sector growth races to 33-month high in February, survey shows

By Liangping Gao and Ryan Woo

BEIJING, March 4 (Reuters) – China’s services activity expanded at its fastest pace in 33 months in February, underpinned by firmer demand including a pickup in overseas orders, while rising costs pushed output prices to their highest in 21 months, a private-sector survey showed on Wednesday.

The RatingDog China General Services PMI, compiled by S&P Global, rose to 56.7 in February from 52.3 in January, the strongest reading since May 2023. The 50-point mark separates expansion from contraction.

Together with the companion manufacturing gauge, the services reading suggests a tentative improvement for some firms early in the year. Still, structural imbalances, trade tensions and heightened geopolitical uncertainty remain key downside risks to the outlook.

The result contrasted with an official survey released earlier in the day that showed non-manufacturing activity contracted for a second month in February.

The Composite Output Index climbed to 55.4 in February from 51.6 in January, the private survey showed, the quickest pace since May 2023, as output growth accelerated across both manufacturing and services.

Chinese leaders have been pledging to boost domestic consumption in the services sector and tackle deep-rooted overcapacity problems, amid concern the export boom that cushioned the economy from U.S. tariff shocks last year may prove difficult to sustain.

“External uncertainties and the current softness in employment may constrain the sustainability of this improvement to some extent. The Services PMI is expected to maintain its expansionary trend in the short term,” said Yao Yu, Founder at RatingDog.

New business grew at the fastest pace in six months, supported by domestic promotional activity and increased client enquiries. The sub-index tracking overseas demand expanded at the quickest pace in a year.

Service providers reduced staffing levels in February after a slight increase in payrolls at the start of the year, citing cost controls. That contributed to a further build-up in backlogs of work.

Cost pressures also intensified, with average input prices rising faster than in January amid higher wage and energy costs. Firms raised output charges as demand strengthened, with the relevant sub-index at its highest level since May 2024.

Business sentiment improved marginally in February, though firms cited concerns about intense competition.

(Reporting by Liangping Gao and Ryan Woo; Editing by Shri Navaratnam)