Insights 
VT 
In June 2025, the Caixin / S&P PMI for services in China reported a figure of 50.6, marking the slowest growth in nine months. This is a drop from the previous 51.1. The decline is attributed to weaker demand and a sharp decrease in export orders, the steepest since December 2022.
The cautious approach to hiring among service providers led to an increase in backlogs, the fastest in a year. Output prices decreased at a rate not seen in over three years due to intense market competition and reduced pricing power. However, business sentiment remained positive, with expectations largely unchanged from May.
Composite PMI Rise
The composite PMI rose to 51.3, improved by a stronger manufacturing sector, up from 49.6 previously. Earlier, official PMI data for June 2025 indicated a services figure of 50.5 and a composite of 50.7. The Caixin manufacturing PMI reached 50.4, above the anticipated 49.0 and up from 48.3 in the prior month.
That Caixin / S&P services PMI reading of 50.6 nudging just above the threshold indicates activity remains technically in expansion, but only just. It’s a clear deceleration and aligns with signs that domestic demand has faltered. Export orders are showing pressure too, falling at their steepest pace since late 2022—a telling detail that suggests global appetite for Chinese services has taken a knock. What catches our attention here is not just the drop itself, but the concurrent rise in backlogs despite weaker hiring. It’s an imbalance that pushes output constraints to the surface, an early warning for potential supply bottlenecks if this continues.
Zhou’s firm signalled lower output prices, the sharpest price drop in over three years. Not because input costs collapsed, but because firms appear increasingly unable to pass on costs to customers in a more price-sensitive market. There’s no slack in competition either—services providers are under pressure from all directions, and it shows. What this tells us is that margin compression could intensify if providers are forced to discount further while costs remain sticky.
Future Expectations Holding Steady
Despite all that, the outlook—strangely—is holding steady. Future expectations aren’t souring, although there’s clearly little upside being factored in either. Sentiment isn’t irrationally hopeful, but it lacks urgency. That suggests optimism is firmly pinned on policy support or an improvement in demand trends that hasn’t happened yet.
By contrast, the manufacturing picture has brightened slightly with the composite index showing a stronger manufacturing push. Chen’s team reported a manufacturing PMI ticking up to 50.4 from 48.3. That’s not a small adjustment. When read alongside the composite index moving to 51.3, it becomes evident that industrial output, rather than domestic services, is carrying more weight right now.
In this setting, we need to reshuffle expectations about where momentum is coming from. Services are no longer a reliable engine in the short term. The improvement seen in factory output masks the underperformance in domestic-facing sectors. If firms are keeping hiring minimal and price cuts are becoming the default, the short-term data cycle will likely continue to show stress. Not structural collapse, but certainly fragility.
Where price action should be focused is in the divergence within the composite index. Consumers appear more cautious, and corporates report flatter volumes. If factory gate numbers keep climbing, but the downstream service sector is frozen, it will be difficult for broader momentum to build. The imbalance will show up.
So rather than aiming to time any single data point, the best approach is to react to shifts in breadth and depth. Focus on where activity is improving at the margin—not just absolute levels. We may find that over the next few weeks, signals from the upstream sector become more telling indicators of real demand trends than any headline number.
