Challenges in China's Service Sector Amidst Trade Tensions

Spending by Chinese travelers increased by 8% during the May Day holiday, reaching 180.27 billion yuan ($24.92 billion), yet this falls short of pre-pandemic levels. The holiday serves as a key indicator of consumer confidence in China's economy, which is under strain due to economic challenges and the ongoing U.S.-China trade tensions.

Despite an uptick in domestic trips to 314 million and a rise in transactions via Weixin Pay, overall spending per person over the five-day period increased by only 1.5% to 574.1 yuan. This is still below the 2019 figure of 603.4 yuan. Box office sales notably declined, reaching only half of the earnings compared to the same period in 2024.

The service sector's growth slackened in April, with the PMI falling to its lowest since September, indicating economic slowdown. New business growth and hiring in the sector are constrained, with companies expressing concerns over U.S. trade policies. Services account for 56.7% of China's GDP, highlighting the significance of this sector amid broader economic challenges.

(With inputs from agencies.)