A reading above 50 indicates on-month expansion and a reading below that indicates contraction.
Despite the stronger reading for services, weakness in the Manufacturing PMI suggests the economy is weakening overall, HSBC chief economist for China Qu Hongbin said in a statement.
"The underlying strength of the economy is softening, which should ultimately weigh on the labour market," Mr. Qu said. He called for the government to use "fine-tuning" measures to support growth.
China's official nonmanufacturing PMI fell to 54.5 in March from 55.0 in February, according to a statement on Thursday from the China Federation of Logistics and Purchasing.
The HSBC China Services PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives at more than 400 private service-sector companies.