Chinese service sector activity accelerates
While American economic indicators begin to turn red, China’s number shows a division between the power of services and manufacturing weakness. China’s Caxin Service PMI increased from 50.7 in April to 51.1 May, lining with consensus. According to May survey:
- Despite falling in the new export business for the first time in 2025, the new trade development promoted the activity of the service sector.
- Service providers increased the level of staffing in May, cutting two months job.
- Increased procurement prices and increase in wages increased average input prices, although sales prices declined for the fourth month.
Caixin Insight Group Senior Economist Dr. Wang Jhe commented in the May survey, which states:
“Employment expanded. The labor market abolished its two -month line of contraction and recorded a minor expansion in May, with the same gauge not seen high since November. Some companies continued to cut headcounts to control the cost, while others hired more workers in response to the growing demand.”
While the service sector activity improved, China’s manufacturing data depicted a magnificent painting. Caixin manufacturing PMI fell in May to 48.3, below 50.4 in April.
Seriously, the PMI declined the lowest since the neutral 50 level and Q3 2022 since the new orders fell at the fastest rate in two-and-a-half years. The demand for weak foreign countries affected the labor market, potentially targeted domestic consumption by reducing the effects of Beijing’s stimulation.
The recession in manufacturing activity overshraded the increase in the speed of the service sector, leaving the Caxin Composite Index at 49.6 in May, below 51.1 in April. In particular, the production of private sector fell for the first time since December 2022, in which employment decreased slightly.
Market Eye Beijing for Stimulation and Business Updates
Investors reacted to mixed PMI data as the focus returned to the US-China business headlines.
On 5 June, the mainland CSI 300 and Shanghai Composite Index of China decreased by 0.06% and 0.02% respectively. In contrast, the Hang Seng Index held rallies of 0.94%, extending its year-on-year-old (YTD) profit by 19%, operated by technical shares. The Round Hahil China Dragon ETF is 21% YTD, performing better than the NASDAQ Composite Index, which has obtained only 0.78% YTD from the decline of 2.7% in the Mag7.
This deviation highlights the market expectations for Chinese stimulation and doubt around American efforts to disrupt China’s technical field.