By Kevin Yao
BEIJING (Reuters) - Activity in China's factory sector expanded slightly in June though not as much as expected, while growth in the services sector sped up, official surveys showed, offering some signs that the world's second-largest economy may be starting to slowly level out after a raft of support measures.
Beijing has rolled out a flurry of steps since last year, including interest rate cuts and more infrastructure spending, but analysts remain wary about the outlook given the still-weak property market, erratic global demand for China's exports and fears of a collapse in its wild stock market.
The government is due to release second-quarter gross domestic product data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.
"In general, the softness in the manufacturing sector remains, requiring more policy recalibration", Liu Li-Gang and Zhou Hao at ANZ said in a research note.
"Looking ahead, as real interest rates faced by Chinese companies remain elevated, we see that further monetary easing is still highly needed".
With demand weak at home and abroad, factory growth remained tepid, with the reading just above the 50 point level that separates contraction from expansion on a monthly basis.
The official Purchasing Managers' Index (PMI) stood at 50.2 in June, unchanged from the previous month's reading, the National Bureau of Statistics. Analysts polled by Reuters had predicted it would edge up to 50.3.
"Business development momentum is still insufficient, and domestic and foreign demand remains weak", the bureau said.
The sub-index for new orders - a proxy for domestic and foreign demand - fell to 50.1 in June from May's 50.6. New export orders fell to 48.2 from 48.9 in May, indicating contraction in foreign demand for a ninth straight month.
And stressed factories continued to shed jobs, with the employment sub-index inching down to 48.1 from May's 48.2.
A private factory survey also released on Wednesday showed activity contracted for the fourth straight month in June but at a slower pace than in May. The official survey focuses on larger, state-owned firms, and the private one on small and mid-sized companies which are facing tougher financial and operating conditions.
The central bank cut lending rates on Saturday for the fourth time since November and trimmed the amount of cash that some banks must hold as reserves, stepping up efforts to support the slowing economy.