The official data showed on Monday that the manufacturing PMI dropped to a four-month low of 50.1. The HSBC reading was even lower last month at a three-quarter low of 48.2, compared with 49.2 in May.

Sluggish overseas demand is exerting a strong drag on both the manufacturing and service industries, although economic indicators for European countries and the United States suggest some improvements in May and June, said Chang Jian, a senior economist at Barclays Capital.

The sub-index for service sector employment rose to 51.5 from 51.3 in May, the NBS said. However, employment in the manufacturing sector is under pressure, as indicated by a reading that decreased to 48.7 from 48.8.

As employment has not experienced a serious decline, the government may delay economic stimulus measures and focus on transforming the investment-oriented growth model into a more sustainable pattern driven by domestic consumption.

The service sector is seen as having the most potential to stabilize the world's second-largest economy at a time when the manufacturing sector is experiencing excess capacity and weakened domestic and external demand.

The service industry now can provide more employment in China compared with factories. It accounted for 46 percent of GDP growth in 2012.