China’s Service Sector Stumbles as Expansion Hits Soft Patch in November

02 December 2025

The engines of China’s service economy sputtered in November as the private-sector services index dipped to its weakest growth in five months. The RatingDog China General Services PMI, produced by S&P Global, fell to 52.1 from 52.6 in October still above the 50 threshold that separates expansion from contraction, but signaling a clear loss of steam.

Earlier data from the government’s own index painted a darker picture. The official services PMI registered 49.5, down from 50.2 a month earlier slipping below the neutral mark and suggesting actual contraction among larger firms, including many state-owned enterprises.

In other words, while smaller, often export-oriented service providers still managed modest growth, the broader sector heavily weighted toward larger domestic service providers appears to be struggling.

One of the starkest warning signs: hiring in the service industry contracted for a fourth straight month. At the same time firms reported a build-up of unfinished work as demand softened, especially for new domestic orders. Although overseas demand rebounded boosted in part by easing tensions in the U.S.-China trade war, it was not enough to offset weakening internal consumption.

Cost pressures remain a concern. Input prices covering raw materials, energy, office supplies and fuel continued to climb, albeit at a slower rate. Some providers tried to pass on a portion of these increases to customers, resulting in slight rises in prices for services. That reflects a delicate balancing act: firms attempt to shore up shrinking margins without scaring away cost-conscious consumers.

Despite all this, business sentiment still managed a slight uptick but only barely. The measure of confidence in the upcoming months rose, yet did so at its slowest pace since April. That weak optimism suggests firms are bracing for more headwinds rather than expecting a swift rebound.

This slump emerges amid broader signs of economic fatigue in China. Manufacturing has already been under pressure: recent surveys from private sources show factory activity sliding below growth thresholds, largely dragged by poor domestic demand and uncertainty in global trade.

For policymakers in Beijing, the data presents a growing dilemma. The long-expected pivot from investment and manufacturing toward a consumption-led, service-driven economy seemed to be gaining momentum earlier this year. But without fresh, large-scale stimulus and in the face of a fragile global backdrop that transition now seems more uncertain.

The consequences could be widespread. For millions employed in restaurants, retail, travel, logistics and other service-intensive fields, shrinking demand and job cuts risk undermining income stability. For domestic consumption overall, the dip could suppress growth in household spending, a key pillar for the country’s economic rebalancing plans.

What happens next may hinge on the timing and scale of government intervention. Analysts urge targeted support for service-oriented small and medium enterprises. Others argue for structural reforms: easing costs, encouraging consumption, and providing fiscal incentives that may rekindle demand. Without timely action, the modest optimism among businesses could dissolve into prolonged stagnation.

In the broader arc of China’s economy, November’s slowdown serves as a caution. Growth based on exports and manufacturing is no longer enough. The transition to a consumer-driven future may still be the goal but its path looks increasingly rocky.