China's manufacturing sector witnessed an improved business climate in July as a key indicator went up for a second straight month, while the service sector continued to see vibrant activities, official data showed Monday.

The purchasing managers' index (PMI) for the sector came in at 49.3 in July, up from 49 in June and 48.8 in May, according to the National Bureau of Statistics (NBS). A reading above 50 indicates expansion, while a reading below reflects contraction.

Among the 21 surveyed industries, 10 reported expansion in July, up from 8 a month earlier. There was an overall improvement in the manufacturing climate, NBS statistician Zhao Qinghe said.

Monday's data also showed that the non-manufacturing PMI -- 51.5 in July -- has stood well above the boom-or-bust line for seven consecutive months, which indicated robust activities in the service and construction industries.

Both manufacturing and non-manufacturing businesses maintained a stable outlook as the sub-indexes measuring market expectations were in the high-climate zone, Zhao said, noting that the Chinese economy has maintained its recovery trend.

While the PMIs continued to warm up, a complicated external environment still posed challenges to Chinese companies.

As the manufacturing sectors of major economies, including the United States and European countries, continued contraction, Chinese factories still faced major difficulties of falling overseas orders and demand, Zhao said.

At a recent high-level meeting, Chinese policymakers identified new difficulties and challenges facing the economy, such as insufficient domestic demand and difficulties in the operation of some enterprises, and pledged a string of measures to counter the headwinds.

Efforts will be made to improve tax and fee reductions, support innovation, the real economy and small firms, bolster consumption, spur private investment, and adjust and optimize real-estate policies in a timely manner, according to the meeting of the Political Bureau of the Communist Party of China Central Committee a week ago.

China has the confidence and capability to achieve annual economic and social development targets, the National Development and Reform Commission has said, noting that the economy will maintain a stable and sound trend in the second half of the year.

China achieved a 6.3-percent GDP increase in the second quarter of the year, bringing the growth for the first half to 5.5 percent. The full-year growth target was set at around 5 percent.