China's services sector grew at its fastest pace in three months in December as new orders remained strong, a private survey showed.

Analysts said this was an encouraging sign of strength despite the fact that manufacturing activity is slowing and the property market is softening. 

The robustness in the services sector contrasted sharply with surveys last week which showed Chinese factories were struggling at the end of 2014, suggesting a further loss in economic momentum. 

Those findings reinforced expectations that more stimulus measures are on the cards.

These could come either in the form of more liquidity injections by the central bank, interest rate cuts or reductions in the amount of reserves banks must hold to encourage them to lend. 
The HSBC/Markit Services Purchasing Managers' Index (PMI) picked up to 53.4 last month from November's 53, well above the 50-point level that separates growth from contraction in activity on a monthly basis. 

A sub-index measuring new business cooled slightly to 53.9 in December from a two and a half year high of 54.2 in November, but remained well in expansion territory. 

The labour market was also buoyant, with the employment sub-index hitting an 18-month high as companies expanded. Chinese leaders suggested last year they could tolerate somewhat slower economic growth as long as labour markets remained healthy. 

But services firms were not so optimistic on the outlook. A sub-index for business expectations for the year ahead dipped to the lowest level since August 2014, with many firms saying increasing competition was dampening their pricing power. 

"The services sector continued to hold up well amidst the manufacturing downturn, providing some counter-weight to the downward pressures on the economy," said Qu Hongbin, chief China economist at HSBC. 

"We continue to believe that there is insufficient demand in the overall economy and more (policy) easing measures are warranted in the coming months," he added. 

Hurt by a sagging housing market as well as slowing domestic demand and investment, China's economy is expected to grow at its slowest pace in 24 years in 2014, with annual growth seen at 7.4%. 

With weakness in property and fixed investment expected to persist for much of this year, and bad loans likely to rise, some economists have urged Beijing to set a 2015 growth target of 7% for 2015, compared with 7.5% for 2014. 

After saying for months that China does not need any big economic stimulus, the central bank unexpectedly cut interes trates in November for the first time in more than two years to support growth. 

It has also loosened some lending restrictions to persuade banks to make more loans and injected funds into the banking system in an attempt to bring down high funding costs. 

Those moves may have bought the central bank some time to see if conditions improve, though many economists still expect more rate cuts as well as reductions in banks' required reserveratios (RRR) this year.