China's services sector posted its fastest growth in seven months in December as the Caixin purchasing managers index unexpectedly rose to 52.2 (vs. consensus 51.4) after dipping to 51.5 in November from 52.0 in October. The index indicated expansion for two years. New business gains offset the drag from weaker demand from overseas, which showed its first decline since August 2023. Higher costs led to the first increase in selling prices in six months.

Sentiment in the Chinese services sector remained positive but the level of business confidence eased to the second-lowest since March 2020, the December survey showed. Some businesses expressed concerns over rising competition and the negative effect outlook for international trade.

In light of slowing factory activity, the composite index covering the entire economy slipped to 51.4 (consensus 52.2) in December after rebounding to 52.3 in November from 51.9 in October but the index was still above the neural line of 50 for the 14th straight month.

In last week's data, China's manufacturing sector showed expansion for the third straight month in December but the pace of growth as indicated by the Caixin PMI unexpectedly slowed to 50.5 (vs. consensus 51.6) after rising to 51.5 in November from 50.3 in October. The slowdown was caused by lower growth in new orders and production while weak exports dampened sales.

The Chinese economy has been struggling to recover from the slump triggered by property market debt crisis, prompting Beijing to promise more fiscal and monetary stimulus measures amid heightened global uncertainty. U.S. President-elect Donald Trump has threatened to impose a 25% tariff on all goods from Mexico and Canada, and an additional 10% tariff on imports from China.

The S&P China Services PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private service sector companies. The panel has been carefully selected to accurately replicate the true structure of the services economy.

The S&P China Composite PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and is based on original survey data collected from a representative panel of over 800 companies based in the Chinese manufacturing and service sectors.

The PMIs have developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.