3rd Ld-Writethru: China Focus: China's manufacturing activity stable in June, services boom

China's manufacturing business activity in June remained in expansion territory while growth in the services sector quickened, suggesting continued economic improvement as the government's supportive measures gradually took effect.

The manufacturing purchasing managers' index (PMI), a key measure of factory activity in China, posted 50.2 in June, unchanged from last month, according to data compiled by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, and China's manufacturing PMI figures have been above the expansion/contraction threshold for the last four months.

The production subindex posted 52.9, flat with last month. But the second quarter was better than the first, said NBS statistician Zhao Qinghe.

As a sign of successful economic restructuring, growth of high-tech and consumer products manufacturing continued to beat overall manufacturing, while high energy-consuming industries saw slower growth, Zhao said.

However, the subindex for new orders came in at 50.1, 0.5 percentage points lower than last month, as domestic and international demand remained subdued.

On the same day, HSBC released its version of China's June manufacturing PMI, which posted 49.4, up from 49.2 in May. It was the fourth successive month that the figure was in contractionary territory.

Official PMI covers large enterprises as well as small and medium-sized enterprises (SMEs), while the HSBC poll is more focused on SMEs.

On the upside, there were signs of improvement in the shape of renewed increases in total new orders and new export business, suggesting that client demand both at home and abroad is reviving, said economist Annabel Fiddes in a note accompanying the HSBC release.

"However, it is likely that more stimulus measures will be required to ensure that the sector regains growth momentum and to encourage job creation," Fiddes said.

Meanwhile, growth in the services sector quickened in June as the official services PMI rose to 53.8 from May's 53.2.

The new orders sub-index of the services PMI rose to 51.3 in June from 49.5 in May. The employment sub-index edged up to 49.7 from May's 47.6, though it still stayed below the 50-point level.

The sub-indices of business activities and new orders for the construction industry in June rose 4.2 and 2.8 percentage points, respectively, indicating steady growth in market demand.

Zhao attributed the expansion in the two sectors to improvement in the real estate market of some of the biggest cities since March as well as government investment in big infrastructure projects.

Weighed down by a property downturn, industrial overcapacity and tepid consumption, China's economic growth has slowed. The economy expanded 7 percent in Q1, down from a 7.3 percent increase in the last quarter of 2014.

The government has responded with a steady drumroll of policy easing. The People's Bank of China, the central bank, cut interest rates for the fourth time since November and trimmed the amount of cash banks are required to hold as reserves on Saturday.

"We predict monetary policy easing will continue and fiscal support will increase in the second half of the year. A mild economic recovery before the year's end can be expected as the effective loan rate continues to drop and the real estate market warms up," said China International Capital Corp., the country's biggest investment bank.

China is due to release its Q2 GDP data on July 15. Endi