Beijing: China’s services sector expanded at its fastest pace in three months in September 2026 as stronger new orders, including business from overseas customers, lifted activity and provided another encouraging signal for the world’s second-largest economy.
The RatingDog China General Services Purchasing Managers’ Index rose to 51.6 in September from 51.4 in August, according to the private-sector survey reported by Reuters. A reading above 50 indicates expansion, while a reading below 50 indicates contraction.
New orders strengthened in September
The improvement was supported by faster growth in new business. Companies reported better demand and efforts to expand their customer bases, while new export orders also increased at a quicker pace than in August.
That matters because services cover a broad range of consumer and business activity. Unlike a manufacturing rebound driven primarily by factories and exports, stronger services can offer clues about domestic spending, employment and business confidence.
Employment rose for a fifth consecutive month
The survey showed service-sector employment increasing for a fifth straight month as businesses added workers to handle heavier workloads. The pace of hiring, however, eased to a four-month low.
For policymakers, employment is an especially important part of the recovery story. China has been trying to strengthen household confidence and domestic demand while navigating a prolonged property downturn and an uncertain external trade environment.
Businesses faced continued price pressure
Input costs continued to rise, although at a slower pace than in August. At the same time, output prices declined for the first time in four months, with Reuters reporting the sharpest drop since April 2022.
This combination can squeeze company margins: businesses may pay more for labor, materials or energy while finding it difficult to pass those costs on to customers. It also shows why stronger activity does not automatically mean every service company is experiencing stronger profitability.
Confidence improved
Despite those pressures, business confidence strengthened. Survey respondents pointed to expectations for better market conditions, expansion plans and new projects.
The broader RatingDog China General Composite PMI, which combines manufacturing and services, rose to 52.4 in September from 52.1 in August. That indicates faster growth across private-sector activity overall.
Manufacturing improved at the same time
The services figures arrived alongside better manufacturing data. China’s official manufacturing PMI returned to expansion at 50.1 in September, while the private RatingDog manufacturing PMI rose to 52.1.
Read our detailed report: China factory activity returns to growth as AI boom lifts manufacturing.
Taken together, the surveys suggest the economy entered the final quarter of 2026 with improved momentum in both factories and services. Still, the strength of the recovery varies across sectors and broader challenges have not disappeared.
Why services are crucial to China’s economic rebalancing
China has long relied heavily on manufacturing, infrastructure and investment. A stronger services economy can help rebalance growth toward consumption and create jobs in areas ranging from tourism and transportation to finance, technology, healthcare and professional services.
That is especially relevant while the property sector remains weak. When households are uncertain about housing values, income prospects or employment, they may save more and spend less. A sustained services recovery would therefore provide evidence that confidence is improving beyond the industrial economy.
Overseas demand adds another positive signal
The acceleration in new export orders suggests foreign demand contributed to September’s services growth. Cross-border business services, tourism and other internationally exposed activities can provide additional support when domestic demand is uneven.
China’s external sector remains important to its broader economic performance, although trade tensions and policy changes in major overseas markets create risks. The country is also relying increasingly on high-tech manufacturing and AI-related investment as sources of growth.
What economists will watch next
One month of stronger PMI data does not establish a lasting recovery. Analysts will watch October surveys, retail sales, investment, employment, property indicators and future GDP data to determine whether the September improvement can be sustained.
Particular attention will be paid to new orders and hiring. If both continue to strengthen, that would suggest businesses see enough demand to expand. If output prices remain under pressure, however, concerns about intense competition and weak pricing power could persist.
Bottom line
China’s September services PMI of 51.6 is a constructive signal. New business strengthened, overseas orders improved, employment increased for a fifth month and business confidence rose. Combined with better manufacturing readings, the data point to firmer economic momentum at the end of the third quarter.
But the recovery remains incomplete. Property weakness, household caution and pressure on company pricing still matter. The next challenge is turning September’s stronger activity into sustained growth in jobs, incomes and domestic consumption.
External source: Reuters — China services growth hits three-month high.
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