Activity in China’s services sector expanded at the slowest pace in four months in June as weak new export growth offset stronger domestic new business, a Caixin survey showed on Wednesday.

The Caixin China General Services Business Activity Index, which provides a snapshot of operating conditions in the country’s services sector, fell to 52 in June from 52.7 the previous month, the lowest reading since February. A reading above 50 indicates expansion, while a number below that signals a contraction in activity. Policymakers are counting on the labor-intensive services sector, which accounted for more than 60% of China’s economic growth in the first quarter, to create millions of jobs as the country’s economic structure shifts further away from a model dependent on manufacturing and heavy-industry.

“The conflict between China and the U.S. impacted business confidence rather heavily,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, an affiliate of Caixin Global. “Although its impact on exports hasn’t been fully reflected in the short run, the longer-term situation doesn’t look optimistic.”

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