The Listener PTERM in the TCPIP LINE was defined with parameter TASK IS RHDCNP3W MODE IS SYSTEM. Once it was changed to MODE IS USER the Web Services Demo worked as expected.
Example:
ADD PTERM TCPWSRV ENABLED IN LINE TCPIP MAXIMUM ERRORS IS 3 PRINTER CLASS IS 1 READBUFFER TYPE IS LISTENER TASK IS RHDCNP3W MODE IS USER PORT IS 3850