China Services PMI Rises, Manufacturing Slumps as Xi Weighs Trade, Stimulus Path
By: Bob Mason
Updated: Jun 05, 2025, 03:19 GMT+00:00
Key Points
- Trump’s tough talk on Xi Jinping stokes market fears of stalled US-China trade negotiations.
- China’s Caixin Services PMI rose to 51.1 in May, marking a rebound in employment and activity.
- Hang Seng Index rallied 0.94% as tech stocks outperformed US stocks.
Markets on Edge
Trade developments between the US and China continue to drive market sentiment. Following US accusations of China breaching the trade war truce, President Trump escalated trade tensions, signaling potential calls to Xi Jinping to ease the mood. However, the path remains rocky.
“I like President Xi of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” – Donald Trump
Recent US economic indicators show weakening signs, with an ADP report revealing a job increase well below expectations. Trump responded to this unfavorable data, emphasizing the necessity for immediate rate cuts.
China Services Sector Activity Accelerates
While the US economy shows signs of stress, China's services sector thrives. The Services PMI climbed from 50.7 in April to 51.1 in May, supported by new business and improving employment figures. Even though new export business fell for the first time, the overall sentiment in the services sector remains robust.
- Staffing levels in services increased, reversing a two-month cut trend.
- Average input prices are up due to rising costs and labor rates, but selling prices continue to decline.
“Employment expanded. The labor market ended its two-month streak of contraction…” – Dr. Wang Zhe
Manufacturing Weakness
On the flip side, manufacturing struggles continue with a Caixin Manufacturing PMI dropping to 48.3. The lack of demand has significant consequences for employment, posing risks to the broader economic landscape.
Markets Eye Beijing for Stimulus and Trade Updates
Investors are now looking toward Beijing for signals of potential stimulus amidst the mixed economic indicators that point to uncertainties. The Hang Seng Index's growth highlights optimism in the tech sector despite global market worries.
Outlook
The outlook remains cautious. Trade talks are fragile, and the risk of reintroduced tariffs looms large. Progress could significantly impact market sentiment and equity demand.
Summary
As we watch these developments, stay tuned for updates that affect global markets and explore how US-China tensions reshape economic landscapes.
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