China services growth hits three-month high as new orders rebound

China’s services sector accelerated to a three-month high in May, but the more important signal was hidden inside the details: new orders, overseas demand and hiring all moved back into growth at the same time. That points to firmer domestic activity, yet it also leaves policymakers and investors facing an uneven recovery, with services improving while property and manufacturing remain a drag.

The RatingDog China General Services Purchasing Managers’ Index, compiled by S&P Global, climbed to 54.4 in May from 52.6 in April, comfortably above the 50 mark that separates expansion from contraction. The composite output index also strengthened, rising to 54.0 from 53.1, suggesting the broader services economy kept expanding at a solid pace. The survey, based on responses from about 650 service-sector companies, was collected between May 9 and May 22.

The strongest part of the release was demand. New business grew at the fastest pace in three months, helped by better market conditions, business innovation and new client wins. New export business returned to growth after slipping in April, a meaningful sign for companies tied to overseas demand. Service providers also added jobs for the first time in four months, while backlogs increased, indicating that order books were firmer than the headline reading alone implied.

That matters because the private survey broadly matched official data that had already shown services moving back into expansion. The National Bureau of Statistics of China said the non-manufacturing PMI rose to 50.1 in May from 49.4 in April, while the service-sector business activity sub-index improved to 50.3 from 49.6. The official figures showed China’s services engine edging back into growth after April’s contraction, but only modestly. Manufacturing, by contrast, remained at 50.0, leaving the overall rebound dependent on a narrow set of better-performing sectors.

The recovery was not cost-free. Input cost inflation accelerated to its highest level since October 2024 as oil, fuel, procurement and wage costs increased. That raises an important question for the months ahead: whether firms can turn higher activity into durable profitability, or whether stronger demand will be offset by squeezed margins.

For U.S. investors, the data argue against writing off China’s consumer-facing economy. For exporters, especially those selling services, industrial inputs or goods linked to travel and business activity, a steadier Chinese services sector could support demand. For policymakers in Washington, the numbers suggest Beijing’s stimulus is having some effect, but not enough to produce a clean, broad-based rebound. China’s recovery is getting stronger in places, but the latest PMI shows it is still fragile, uneven and vulnerable to cost pressure.