The purchasing managers index (PMI) for China's non-manufacturing sector rebounded after falling for three consecutive months, according to official data released on Saturday.
The non-manufacturing PMI stood at 54.1 percent in July, up from 53.9 percent for June, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP).
A PMI reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.
The improving non-manufacturing figure is in line with China's manufacturing PMI, which also rose in July to 50.3 percent from 50.1 percent in June, according to previously released figures.
Cai Jin, vice chairman of the CFLP, said the slight increase indicated a good start for China's economy in the second half of the year.
"Although challenges remain, China's economy has the foundations for steady growth," Cai said.
China's economy has been stuck in a protracted weak recovery, easing to 7.5-percent growth in the second quarter from 7.7 percent in the first three months and 7.9 percent in the final quarter of 2012. Worries are growing that the prolonged slowdown could weigh on the global economy.
The CFLP said China's service sector is becoming increasingly active, giving a boost to the economy.
In the service sector, the sub-indices for business activity and new orders both rose for two consecutive months, up to 53.0 percent and 50.0 percent, respectively. The sub-index for employment gained three percentage points to 53 percent.
The CFLP said information-related consumption increased rapidly during the period. New types of businesses appearing in the service sector will push economic growth and restructuring in the second half, it said.
Construction activity also remained at a high level in July, according to the CFLP, with the sub-index for business activity staying above 58 percent.
Deepening industrialization and urbanization, a government plan to renovate run-down urban areas and increased investment in the railway sector mean the construction sector will maintain active in the second half, the CFLP said.
The CFLP said it is worth noting that small businesses in the non-manufacturing sector saw their performance improve in July.
Their sub-indices for business activity and new orders both ended two consecutive monthly decreases and rebounded, although they still remained below 50 percent.
The CFLP said it expects that more supportive measures, like the tax cuts recently implemented by the government, will be introduced in the second half to aid small businesses.
The CFLP warned of a trend of rising costs in the non-manufacturing sector. The sub-index for intermediate input prices rose 3.2 percentage points over June to 58.2 percent in July.
China's non-manufacturing PMI is based on a survey of about 1,200 companies in 27 industries.