China Caixin PMI Services dropped to 54.1 in July, down from 58.4, missed expectation of 56.8. PMI Composite dropped slightly to 54.5, down from 55.7.

Wang Zhe, Senior Economist at Caixin Insight Group said: “Both the manufacturing and services sectors continued recovering, especially manufacturing. New orders kept increasing and the backlog of work also rose. The gauge for business expectations remained high, suggesting that companies were confident about the economic recovery. Overseas demand continued to be troubled for both sectors.

“Employment was still a key problem. The combination of expanding demand and production with shrinking employment has dogged the economy for several months. In hard times, enterprises look to shore up profits by cutting costs, like labor. Therefore improving employment requires more time and greater confidence among businesses.”