Growth in China's services sector slowed sharply in July to its lowest level in nearly nine years, a private sector survey showed on Tuesday, indicating a recovery in the broader economy is still fragile and may need further government support.
Weakness was also seen in China's official services report at the weekend, which showed activity slipped to a six-month low. Both surveys contrast with other data in recent weeks which showed the economy was regaining momentum thanks to a spate of government stimulus measures.
The weaker readings in services, which account for about 45 percent of gross domestic product (GDP), raise the question of whether Beijing needs to do more to support growth, particularly in the rapidly cooling property sector.
The survey indicated a stagnation of service activity last month, as a reading above 50 in PMI surveys indicates an expansion in activity while one below the threshold points to a contraction.
In a sign that economic uncertainty has made companies more reluctant to spend, a sub-index measuring new business growth hit a 68-month low of 50.3 in July.
The unexpected weakness in services comes after two separate PMI surveys last week showed China's factory sector posted its strongest growth in at least 1-1/2 years in July, adding to hopes that the economy was building up steam again after a weak start to the year.
"The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property related activity, such as agencies and residential services, see less business," said HSBC's China Chief economist Qu Hongbin.
"Today's data points to the need of continued policy support to offset the drag from the property correction and consolidate the economic recovery," Qu said.