The purchasing managers index (PMI) for China's service sector posted its fastest growth in 19 months in May, rising to 54.7 on improving new businesses, a HSBC report said Tuesday.

The seasonally adjusted index was 0.6 points higher than April's six-month peak.

A reading above 50 indicates expansion, while a reading below 50 suggests contraction.

The report attributed the growth to a significant increase in new orders.

"This should reduce fears of a sharp growth slowdown. Going forward, the rapid delivery of a mix of supportive measures should filter through to further boost output and employment," said Qu Hongbin, chief economist at HSBC China and co-head of Asian economic research at HSBC.

In May, the index for new business orders in the service sector reached its highest level since October 2010, with new product development and improving demand cited alongside successful promotional activities as helping to boost the headline index, the report said.

The backlog of work in the sector fell in May, the fourth consecutive monthly decline. Growth in the sector's employment was modest, with staff added to cope with increasing new orders and business expansion plans, according to the report

Meanwhile, the sector's average input costs rose for the 31st month by higher labor-related costs, but average charges were lowered for the second consecutive month, as companies were under more competitive pressure, the report said.

The report said companies are optimistic about the future. An index measuring business expectations was only slightly lower than April's one year-high.

Companies linked positive sentiment to expectations of new business wins and better economic conditions, the report said.

The HSBC's seasonally adjusted data jarred with official figures, partly as result of different sampling methods.

According to data released by the China Federation of Logistics and Purchasing (CFLP), the PMI for the country's non-manufacturing sector dropped 0.9 percentage points to 55.2 percent in May, the second straight monthly decline.

The CFLP's non-manufacturing PMI is based on a survey of about 1,200 companies in 27 industries, including transportation, real estate, catering and software development, while HSBC tracks smaller private sector firms, including 400 small- and medium-sized companies.