China’s services sector showed continued expansion in May, driven by strengthening domestic demand and a rebound in new export orders, according to the latest data from a private survey conducted by RatingDog and S&P Global. The Purchasing Managers’ Index (PMI) for general services rose to 54.4 last month, up from 52.6 in April, marking the fastest growth rate in three months and signaling robust sector momentum despite geopolitical uncertainties affecting global markets.

This private PMI figure, which tracks smaller and export-oriented enterprises more closely, aligns closely with the official gauge released earlier by the National Bureau of Statistics. The official services PMI returned to expansion territory at 50.3 in May, compared with 49.6 in April. Both readings suggest service providers are benefiting from earlier macroeconomic policy support aimed at stabilizing growth.

Economic analysts attributed the improved performance to government fiscal measures including subsidies for services consumption and interest relief on loans, which have helped ease pressure on businesses and bolstered confidence. Lou Feipeng, a researcher at the Postal Savings Bank of China, highlighted that these policies have provided a stabilizing effect, reinforcing business optimism.

The sustained growth in new business activity, extending an uninterrupted streak of 41 months, was a key factor behind the overall expansion. RatingDog’s data showed new business expanded at the quickest pace since February, propelled by stronger domestic consumption following the upbeat May Day holiday period. Yao Yu, founder of RatingDog, noted that innovation and new client acquisitions are further stimulating the sector.

External demand for services also improved, with new export orders returning to growth after two consecutive months of contraction. This resurgence in overseas business contributed additional support to the sector’s recovery.

Emerging industries such as information services demonstrated particularly strong momentum, driven by continuous innovation and integration with other sectors. Wu Wei, an analyst at the China Logistics Information Center, emphasized the sector’s potential to foster new productive capacities, viewing information services as a key engine for long-term development.

Business confidence across the services sector climbed to its highest level since February, reinforcing an optimistic outlook for continued expansion in coming months. Yao expressed expectations that with stable domestic demand and supportive sentiment, both the services PMI and broader composite PMI indices will remain in positive territory.

The sector’s medium- to long-term prospects have been bolstered by recent government guidelines issued by the State Council aiming to expand capacity and enhance service quality, targeting a total sector scale of 100 trillion yuan ($14.8 trillion) by 2030.

Despite these positive signs, analysts urge caution, noting that rising cost pressures and external risks could pose challenges ahead. Lou stressed the need for more targeted policies to support small and medium-sized service providers, including enhanced loan subsidies and improved credit support, in order to mitigate input cost increases and preserve growth momentum. Further focus on producer services such as technology, software, and modern logistics could help boost productivity and absorb cost inflation, sustaining the sector’s ongoing recovery.