China’s Economic Strain: PMI Decline Signals Growing Margin Pressures and Market Uncertainty
China’s RatingDog Services PMI Falls, Margin Pressures Rise in Uncertain Economy
By Bob Mason | Published November 5, 2025, 02:24 GMT
China’s RatingDog Services PMI dropped to 52.6 from 52.9 in October, slowing the economic pulse. The fall shows rising stress on service profit margins and a more cautious market stance. The figures bring tough challenges to light while policy makers search for new ways to boost growth.
Growth in Services Slows as Costs Up
The October survey shows mixed paths. New orders grew from strong local demand. At the same time, orders from abroad shrank in early October. The drop in export orders comes from a shaky trade climate that hits many sectors.
Cost issues add more strain. Input prices climbed fast, driven by higher wages and rising raw material prices. Service businesses lowered prices to reach buyers sensitive to cost. These moves put pressure on profit margins, as firms cut jobs and adjust stocks.
Composite PMI Shows Firm Struggles
The softer services PMI along with weaker manufacturing pushed the composite PMI down from 52.5 to 51.8. Several weak signals in the private sector show firms battling profit and staffing gaps. Experts note that these moves may prompt Beijing to take new steps.
Yao Yu, founder of RatingDog, said, “Service demand still grows, but local and export firms perform very differently. Export orders now decline while input prices reach levels unseen since October 2024. Firms must balance between raising prices for costs and lowering prices to keep sales. This balance makes price signs unstable.”
Market and Currency Reactions
Markets moved fast with the soft outlook. Hong Kong’s Hang Seng Index dropped to 25,596 but later recovered. It closed on November 5 at 25,670, down 1.09%. Rising input costs and a soft labor market made investors worry.
In currency markets, the Australian dollar moved erratically. The AUD/USD pair climbed to $0.64718, then fell to $0.64663, and later traded 0.32% lower at $0.64680. The Australian dollar stays sensitive to changes in Chinese growth and global trade rules.
Future Look and Policy Hints
The softness in the PMI came only a week after a one-year trade truce between the U.S. and China. The deal cuts tariffs and lowers trade tensions. Some hope it will boost recovery, yet the numbers show a need for more local steps to support spending and business trust.
Ongoing pressure on margins and signs of a weakening labor market could hurt consumer spending—a key point for Beijing’s aim of about 5% GDP growth in 2025. Investors now await China’s October trade data on November 7 to learn more about export and import trends.
Analysts expect that if local or export activity stays weak, Beijing may try more support. Better trade results might let leaders keep a cautious stance.
What to Watch Next
- China’s October Trade Data (Nov 7): A key sign of export and import strength.
- Market Performance: The CSI 300 and Shanghai Composite indices climbed this year (16.43% and 17.54%), and Hang Seng rose 27.78%. More policy support might keep these gains.
- Policy Measures: More support, using spending boosts or interest cuts, may come if the slowdown continues.
November may be a key month for China’s markets and economy. New data and policy moves will decide if the slow growth holds or gets worse.
About the Author
Bob Mason has 28 years of experience in global financial markets, covering currencies, commodities, and stocks in Europe and Asia. His work comes from long ties with rating agencies and global banks.
For more detailed analysis and real-time updates on global financial indicators, visit FXEmpire.
Disclaimer: This article is for informational purposes only and does not constitute investment advice.
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