China's service sector continued to expand in April, according to an industry index released by HSBC on Wednesday.
The HSBC/Markit China's services purchasing managers' index (PMI) was posted at 52.9 in April, up from 52.3 in March, registering the quickest expansion in four months, according to China's (Xinhua) News Agency.
The index samples more than 400 private service sector companies in China. A reading above 50 indicates expansion.
HSBC said the growth was supported by further expansion in new business, with the pace of new order growth picking up over the month. The bank cited improved customer confidence partly due to strong Chinese stock market performance as the reason.
On Monday, the HSBC/Markit announced that the PMI for China's manufacturing sector in April stood at 48.9, lower than the market forecast of 49.4, the fastest contraction for Chinese manufacturing in a year.
Annabel Fiddes, an economist at Markit, said the downturn in manufacturing operating conditions led to weaker expansion of overall business activity despite a strong start of service companies to Q2.
"Despite recent stimulus measures, such as cuts to banks' reserve ratios and lending/deposit rates, more measures may be required to ensure the economy does not slow further from the 7% growth pace registered in Q1," she said.
"April's services PMI figure was still below 53.1 averaged in Q4 of 2014, suggesting no significant improvement of downward pressure on the economy," said Qu Hongbin, chief economist for China at HSBC.
He predicted an interest rate cut by 25 basis points in this quarter.