China’s Economic Outlook Clouded by Tariffs Despite Services Sector Resilience

• New Work Increased at the Fastest Pace in A Year.
• External Demand Rose for The First Time in Three MONHS. FIRMS attributed the rebound to increasted tourism and stable trade condctions.
• Service Providers Increated Staffing Levels After June’s Cuts. NotBly, Staffing Levels Rose at the Sharpest Rate Since July 2024.
• Service Providers Raceded Output Prices, Passing Higher Input Costs on to Customers. NotBly, Selling Prices Increated for The First Time in Six Months.

Despite the pickup in Service Sector Activity, The S&P Global China General Composite Index Fell From 51.3 In June to 50.8 In July. The S&P Global China General Manufacting Pmi Droped from 50.4 in June to 49.5 in July, Falling Below The Crucial Neutral 50 Level, Signifying A Sector Contraction.

In Contrast to the Service Sector, ManualFactures Reported a Decline in Both DOMESTIC AND EXTERNAL DEMAND, AS WELL as Increasy Price Margin Pressures, Forcing Companies to Cut. President Trump’s Tariff Policies have Weighed on Demand for Chinese Goods, Affecting Manufacturars.

Jingyi Pan, Economist Associate Director at S&P Global Market Intelligence, Remarked:

“Notably, The Latest Survey Signaled A Fresh Increase In Output Charges in July, WHICH ALSO INDICATED IMPROVED CONFIDENCE AS FIRMS WERE COMFORTACT MONTHS.

Market Reaction: Hang Seng Dips As Broader Private Sector Sees Slower Growth July’s Upswing in Service Sector Activity Failed to Lift Market Sentiment. The Composite PMI’s Decline Underscored The Manual Reging Sector’s Greater Impact on the Broader Chinese Economy, Weighting on Sentiment.

The Hang Seng Index Dropped Into Negative Territory After the release of the July Services Pmi Before Steadying Later in the Morning Session. At the Time of Writing, The Hang Seng Index Was Up 0.11% to 24.760 On Heps for A US-CHINA Trade Deal and Fresh Stimulus Measures from Beijing.

Hang Seng Index – 5 Minute Chart – 050825 US Adminstation Plans Rules of Origin Concerns About China’s Economic Outlook Have Pulled The Hang Seng Index Back From Its Three-A-A-Half-YEAR HIGH of 25,736 on July 24. Two Days Leaving Exist Tariffs in Effect.

Notably, President Trump is Reportedly Targeting Targeting Transhipments, Potentilly Affecting China’s Attempts to Bypass US Tariffs on Direct Shipments to the Us. China Beige Book Reported:

“In Addition to the New 40% of Tariffs on Transhipment, The Trump Administration Plans to Put in Place So-Called Rules of Origin for Indirect Shipments in A FEW WEEKS.”

The US Recently Introduced A 40% Tariff on Transhipments Through Vietnam, One of China’s Key Southeast Asian Trade Routs. Notably, Indonesia Agreed to A 19% Tariff on Shipments to The Us.

Chinese Exports to the US Fell 16.1% Year-on-Year in June, While Exports to Southeast Asia, Including Indonesia and Vietnam, Rose 16.8%. The pickup in exports to Southeast asia Contributed to A 5.8% Year-on-Year Increase in Chinese Exports (May: +4.8%). Trade Terms Bolstered China’s Economy, WHICH Expanded 5.2% Year-on-Year in the Second Quarter (Q1: +5.4%).

US Tariffs Targeting TRANSESSHIPMENTS AND EXISTING LEVIES ON CHINESE GOODS MAY ADVERSELY IMPACT TRADE Terms and China’s Broader Economy. Trade Developments Spotlight Ongoing US-CHINA NEGOTIIMS.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero Recently Warned of A Potential Slump in Chinese Exports, Stating:

“Export Growth Might Slow to 2-3% Year On Year in The Third Quarter of This Year, and Perhaps Just 1% in the Last Quarter. Shipments of Low-Value Goods, which. Furniture, Clothes, Shoes, and Toys-Toz Be Most Affected.

Mainland China Equity Markets Advance Amid Economic Uncertainties Mainland China’s Equity Markets Held Their Gaves Despite Weaker Manufacturing PMI Data and the Prospact of Tariffs Targeting Transhipments.

The CSI 300 Has Risen 0.22% in August to Date After Advanceing 3.54% in July. Meanwhile, The Shanghai Composite Index is up 0.81% in August to Date, Following July’s 3.74% GAIN. HOPES OF A TRADE DEAL AND BEIJING’S PLEDGES TO INTRODUCE STIMUNULUS HAVE BOLSTERED DEMAND FOR MAINLANLAND CHINA-LITTED STOKS.

The Hang Seng Index Has Also Extended ITS 2.91% GAIN FROM JULY, RISING 0.11% in August to Date. In Contrast, The Nasdaq composite index have dropped 0.33% this month after gaining 3.7% in july.