China's Services Sector Maintains Growth Streak Despite March Slowdown

China's services industry continued to expand in March, though at a notably slower pace, as weakening demand and ongoing workforce reductions tempered activity across the sector. According to the latest RatingDog Services Purchasing Managers' Index, the reading dropped to 52.1 last month, down from a 33-month peak of 56.7 recorded in February, falling short of analyst forecasts of 53.6. Despite the pullback, the index held above the critical 50-point threshold that distinguishes expansion from contraction, marking 39 consecutive months of sector growth.

The deceleration came after an unusually strong February performance. Business activity and incoming new orders continued rising in March, albeit at a more modest pace. Survey compilers noted that domestic demand remained the primary engine driving growth, underpinned by new project launches, client referrals, and a gradually widening customer base. This internal momentum helped cushion the overall reading even as conditions softened.

On the external front, however, the picture was less encouraging. New export business slipped back into contraction territory following brief gains earlier in the year, signaling that overseas demand for Chinese services is facing renewed headwinds. This divergence between domestic resilience and external fragility highlights the uneven nature of the sector's recovery.

Staffing levels declined for the second consecutive month, as businesses prioritized cost efficiency over headcount expansion. Companies cited strategies such as not replacing departing employees and carrying out internal restructuring to manage operating expenses. Notably, input cost pressures stayed relatively contained during the period, giving firms the flexibility to lower their selling prices in order to remain competitive in a challenging environment.

Overall, while China's services sector is showing signs of moderating momentum, its sustained expansion streak suggests underlying structural resilience, even as external demand risks and labor market caution continue to cloud the near-term outlook.