China’s service industry has remained in an expansion phase as of October 2026, but the growth rate has slowed to its lowest point in three months. Private surveys indicate that businesses have reduced their sales prices for the second consecutive month, while the increase in input costs has reached a five-month high.
According to the Purchasing Managers’ Index (PMI) for China’s service sector compiled by S&P Global and branded under RatingDog, the index fell from 51.6 in September to 50.8 in October. Despite remaining above the crucial 50 mark that separates expansion from contraction, this is the lowest level recorded since July.
Reports suggest that businesses are grappling with intense competition, leading to continuous reductions in average sales prices for the second month running. However, costs for fuel, raw materials, and wages have escalated, leading to the highest rate of input cost growth in five months. Additionally, corporate confidence has plummeted to its lowest level since July. The Golden Week holiday in early October did not bring any significant relief or boost to the service sector.
Data analyzed by Reuters, sourced from the Beijing authorities, indicated that during the recent “Double Eleven” holiday period, domestic tourism spending in China saw an average decline of 1.9% compared to the same period last year, amounting to approximately 893.92 Chinese Yuan. This figure represents the lowest spending average since 2022.
Beyond the tourism sector, the restaurant industry within the service sector is experiencing intensified competition, resulting in damaging price wars.
According to the “2026 White Paper on China’s Catering Industry Ecosystem” and the “White Paper on the Development of China’s Chain Franchising Industry,” the restaurant business in China is facing an escalating phenomenon of homogenization. This has spurred a vicious cycle of price competition that continually compresses profit margins for individual outlets, elongates the return on investment period, and significantly raises the rate at which restaurants are closing. This trend is characterized by a “quick open, quick close” model, which shortens the overall lifespan of dining establishments.
Official data from the Chinese Communist Party also reveals that new demand in the service sector remains weak. In the PMI survey conducted by the National Bureau of Statistics in October, the business activity index for the service sector stood at 50.0, hovering precisely at the boundary between expansion and contraction. The new orders index recorded just 45.2, while the sales prices index was at 49.6, and the employment index was at 46.7—each reflecting values below the 50 mark.
Furthermore, monitoring data from Jihai Brand Monitoring, a subsidiary of Beijing Jihai Zhiheng Information Technology Co., shows that in the first half of 2026, the number of closures in China’s restaurant industry reached approximately 2.0552 million, while only 1.65 million new establishments were opened in the same timeframe, resulting in a net decrease of 410,000 locations.
Amid the turbulence faced by the restaurant industry, around 2 million workers in the sector have already left their jobs in the first half of this year.
A report by the Wall Street Journal on October 31 noted a downturn in growth momentum across China’s manufacturing, service, and construction sectors in October. Manufacturing PMI dropped to 49.3, while the construction activity index fell to 48.0, signaling a wider economic slowdown affecting multiple industries.