For the retailing sector alone, the index for business activities and new orders both climbed to above 70 percent, according to the CFLP.

However, despite a boom in the service sector, the PMI reading suggested a less remarkable performance in the construction and real estate sectors, with the index of business activities for construction remaining flat, with the November level at 55.4 percent, and that of real estate at 44.3 percent.

The real estate new order index was down to 39.3 percent in December, the lowest level since March 2011.

Cai Jin, vice president of the CFLP, said further reform and more favorable policies in taxation will promote a stable development in the service sector and a growth in consumer demand.

With a slowed growth in exports and investment, China is facing a shift in economic momentum, he added.

The federation's non-manufacturing PMI is based on a survey of about 1,200 companies in 20 industries including transport, real estate, retailing, catering and software.