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China Services Show Modest Growth, Stoking Concerns

Activity in China's services sector expanded modestly in May but the pace of growth was little changed from April, a private survey showed on Wednesday, adding to worries about slowing momentum in the world's No.2 economy.

The HSBC/Markit Purchasing Managers' Index (PMI) for the services industry inched up to 51.2 last month after seasonal adjustment, the second-lowest reading since August 2011 after 51.1 in April.

(Read More: Chinese Consumers Are Still Not Spending Enough)

The services sector accounted for 46 percent of China's gross domestic product in 2012, and the weak growth seen in the survey adds to concerns raised by earlier PMI surveys over the the loss of momentum in China.

"A soft patch in manufacturing growth continues to weigh on this industry and adds more downside risks to China's growth rate in 2Q," said HSBC's China chief economist, Qu Hongbin.

China's official services PMI slipped to 54.3 in May from 54.5 in April. The official manufacturing PMI ticked up to 50.8 in May from April's 50.6, but the HSBC/Markit manufacturing PMI dropped to 49.2, the lowest level since October 2012 and down from 50.4 in April.

(Read More: Why China's Slowing Growth Could Be a Good Thing)

A reading above 50 indicates expansion of business and one below 50 implies contraction.

The HSBC/Markit services survey found the sub-index measuring new business orders fell to 51.4 in May, the lowest since August 2011, and down from 51.5 in April.

About 12 percent of respondents reported higher volumes of new orders, but over 81 percent noted no improvement in May versus April.

Input prices for Chinese service providers rose at the slowest pace in 43 months and their service charges fell for the first time in four months due to market competition.

(Read More: Things Are Looking Bad Outside China, Too)

A bright note in May was an improvement in the sub-index measuring employment, with the reading back above 50 from April's 49.6, which had been the first net reduction in staff numbers since January 2009.

Nearly 25 percent of respondents anticipate activity to expand over the next year, while just over 3 percent expect it to contract.

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