A key index of the services sector signaled a modest increase in activity.

The HSBC non-manufacturing Purchasing Managers' Index (PMI) posted 51.3 in July, unchanged from June. A reading above 50 indicates expansion.

The rate of new order growth in the service sector in July rose to the highest level since March, as market demand increased. Employment in the service sector increased slightly, the HSBC said.

Qu Hongbin, chief China economist and co-head of Asian Economic Research at HSBC, said that although the services sector maintained stable growth, "the profit margin continued to be squeezed".

"Without a sustained improvement in demand, services growth is likely to remain lackluster, putting downside pressure on employment growth," Qu said.

The National Bureau of Statistics released the non-manufacturing PMI data on Saturday – a reading of 54.1 in July, up from 53.9 in June.

"It shows the non-manufacturing growth is stable and sound, providing a solid foundation to the overall economy," said Cai Jin, vice-chairman of the China Federation of Logistics and Purchasing.

In addition, the improvement of employment in the service sector is strengthening the power to drive economic growth, Cai said.

The manufacturing PMI also showed an increase to 50.3 in July from 50.1 in June, the bureau said last week.