ChinaJoy 2011 Debut Show

China's fledgling services sector grew in July at its slowest pace in three months as new orders ebbed, a private survey showed, in a further sign that tight monetary policy is sending chills through the world's second-biggest economy.

The HSBC's Services Purchasing Managers' Index (PMI) edged down to 53.5 in July from 54.1 in June, signalling strong but slowing growth. The 50-point level demarcates expansion from contraction.

The slowdown signalled by HSBC PMI contrasts with a services PMI compiled on behalf of the government which rose to 59.6 in July, from June's 57, as new orders climbed. This index is published by the China Federation of Logistics and Purchasing.

A pull-back in China's services sector, which accounts for under 45 percent of its economy, would mirror the plight of its manufacturers, who are grappling with tight policy and softening global demand.

But less brisk business activity may be welcomed by Beijing, which has vowed to keep its policy focus squarely on fighting inflation lest rising prices stir social unrest.

China's determination to fight inflation comes despite growing concerns that an ailing U.S. economy could further hobble global economic growth if it were to lose its prized AAA debt rating.

The HSBC PMI report on Wednesday showed Beijing's steady policy tightening measures, especially those aimed at cooling property prices, were taking effect.

Growth in new orders slowed for the first time in three months, while the pace of job creation was at its weakest since May 2009 as firms tried to keep a lid on costs.

"Service sector activity growth moderated in July, reflecting the effect of monetary tightening and property cooling measures," said Qu Hongbin, an HSBC economist.

But he noted that moderating activity would help cool inflation that is running near three-year highs, while China's resilient economy would limit the degree of a slowdown in the services industry.

The survey showed input costs rising in July, but the pace of gains was at its slowest in five months, with the input prices sub-index declining to 55.6 from June's 56.8.

In a bid to tame price rises, Beijing has raised interest rates five times since October and lifted the deposit reserve requirement ratio nine times.

But inflation still hit a three-year peak of 6.4 percent in June as record-high pork prices drove up consumer costs.

Rising incomes and tight supply have also helped China's property prices to defy tight policy and grind ever higher, complicating Beijing's anti-inflation campaign.

To that end, Beijing has vowed to maintain its clampdown on property speculation and build more government-subsidised homes.