(Aug 5): China’s services activity expanded at its weakest pace in nearly two years, a private survey showed, with businesses turning more cautious about an economy that’s increasingly showing signs of further weakness.

The RatingDog China services purchasing managers’ index slipped to 50.4 from 54.1 in June, according to a statement published Wednesday. That fell far short of the median forecast of economists surveyed by Bloomberg but stayed above the 50 mark separating expansion from contraction. 

The reading is the lowest since September 2024. It roughly tracked the official PMI survey, which showed the services industry slipped back into contraction last month for the first time since April, slumping the most in about two and a half years. Factory activity in July also slowed on adverse weather conditions and weak demand. 

While the services gauge is expected to be in expansionary territory in the near term, the pace of the recovery will depend on the strength of domestic demand and business confidence, said RatingDog founder Yao Yu. 

Business expectations for the year ahead, while still positive, have softened to the lowest since February 2020, he said in a statement. “Confidence was linked to business expansion plans, new projects and promotional campaigns, though some firms adopted a more cautious stance on the economic outlook,” he said.

Concerns over the health of the world’s second-largest economy have been intensifying since April as growth weakened and became more unbalanced. Top officials pledged to roll out “effective new policies in a timely manner” during a key policy meeting last week, but stopped short of introducing any fresh stimulus measures. 

Investors are now looking to stimulus measures as Beijing targets an economic growth rate of 4.5% to 5% this year.

The private and official surveys cover different sample sizes, locations and business types, with the RatingDog report focusing on small and medium-sized firms.

“The headline PMI plunge reflects a sharp cooling in domestic demand, but the underlying engine hasn’t stalled,” said Henry Hao, senior economist at Commerzbank AG in Singapore. “Resilient export activity, long-term backlog growth, and sustained job creation show that while the Chinese service sector is tapping the brakes, it is still expanding.”

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