China’s Economic Outlook Clouded by Tariffs Despite Services Sector Resilience
By Bob Mason | Published August 5, 2025, 04:29 GMT
China’s economy stays on an unsure course as US tariffs press hard on its factory work, while the service work shows strength. Data from S&P Global connects each part with its own pace. The manufacturing side suffers under trade limits and local cost pressures, but the service side builds up hope with rising work and effort.
Services Sector Shows Strong Growth in July
S&P Global’s China General Services Purchasing Managers’ Index pushed up fast in July. The score grew from 50.6 in June to 52.6, marking the fastest jump in local demand over the past year. The report ties this jump to a faster rise in new work and a return of outside orders after three long months. More domestic trips and steady trade keep work moving forward.
Staff counts in the services area rose sharply. This gain comes after a drop in June. Output prices moved higher for the first time in six months. The change tells us that companies now share more trust in their plans. Jingyi Pan, Economist Associate Director at S&P Global Market Intelligence, said, "The services side did well in July. It stands out when the factory work slows down. The fresh rise in prices also shows that firms now have more trust."
Manufacturing Sector Declines Amid Tariff Pressures
In a different turn, the S&P Global China General Manufacturing PMI sank to 49.5 in July. This drop shows that factory work is shrinking. Domestic and overseas demand falls as makers feel higher cost strains and cut jobs. US tariffs, which now add 40% fees on goods passing by Southeast Asia to places such as Vietnam, hit the sector hard. These fees try to stop China from using indirect trade paths to skip direct duties.
Experts point to export work weakening further. The China Beige Book notes that new US rules on shipment origins aim to restrict these indirect moves soon. US tariffs match a 16.1% year-on-year fall in Chinese exports to the US in June. Exports to Southeast Asia grew by 16.8%, which helped with the gap. Through May, overall exports grew by 5.8% compared to last year, backing a 5.2% Q2 GDP rise.
Market and Investor Reactions
Mixed signs shift market mood. Soon after the services PMI report, the Hang Seng Index dropped. Later on, it settled at 24,760—a small gain of 0.11% on early August 5. Traders hope that a new US-China trade deal and fresh money measures from Beijing will spark change. Still, the index has not reached its July 24 high of 25,736. Ongoing trade strain and more tariff moves keep the path clouded.
The stock markets in Mainland China keep a firm hold as they work past the factory troubles and tariff concerns. Both the CSI 300 Index and the Shanghai Composite Index made small rises in early August after a strong July. Traders watch trade talks and Beijing’s promise of new help to boost local buying.
Outlook and Key Upcoming Events
As events progress, traders and experts will keep an eye on these points: the US-China trade data coming on August 7, advances in trade talks, and the size of next steps from Beijing. A move to ease trade rules, along with well-timed government help, may boost market trust and invite more stock buying in Hong Kong and Mainland China. If tariffs get tougher or the new help falls short, growth may slow and the mood among investors might drop.
For real-time updates on China’s trade rules and stock trends, stay tuned to FXEmpire’s economic calendar and market coverage.
About the Author
Bob Mason brings over 28 years of financial industry experience, covering currencies, commodities, alternative assets, and global equities, with a special focus on European and Asian markets. He has worked with multiple global rating agencies and multinational banks.
This article shows the economic and market facts as of early August 2025 and sticks to the data and expert views available at the time.
