It was the 10th straight month the index has stayed above 50 percent, said the China Federation of Logistics and Purchasing, which released the data. Any number over 50 denotes expansion while any number below that denotes contraction.
The July figure was still lower than May's 50.8 percent.
Zhang Liqun, analyst with the Chinese Cabinet's development research center, said the slight rise in July signaled a stabilizing trend in the country's economy, the official Xinhua News Agency reported. The analyst said market expectations for stabilized economic growth have been strengthening and market demand is generally stable.
There have been a number of signs showing the Chinese economy is slowing down. In its latest data, the National Bureau of Statistics said economic growth rate slowed to 7.5 percent in the second quarter from the first quarter's 7.7 percent.
The PMI data showed the sub-index for new orders in July rose 0.2 percentage points to 50.6 percent, while that for new export orders was up by 1.3 percentage points from June to 49 percent last month.
"Today's data doesn't change the reality that the situation in China remains that of declining growth," Simon Littlewood of Asia Now Consulting Group told the BBC.