China's factory activity in June surpassed expectations, with an expansion of 50.5 index points, according to the Caixin China Manufacturing Purchasing Managers' Index (PMI) released on Monday.

While slightly slower than the previous month, this marked the second consecutive month of growth in manufacturing activity. 

Caixin Insight Group senior economist Wang Zhe noted that the improvement in domestic sales was the main driver of the growth, while new export business remained largely unchanged.

Economists surveyed by Reuters had predicted a reading of 50.2 for June while official PMI came in at 49 index points.

The increase in total new order volumes prompted companies to expand their purchasing activity, though the rate of inventory accumulation was only marginal. Stocks of finished items, however, experienced a slight decrease.

Even though employment declined for the fourth month in a row as manufacturers remained cautious over headcount, companies were generally optimistic about the 12-month outlook for output in June, anticipating stronger economic conditions and improved sales.

Wang emphasized the need for stronger policy support at the macro level and higher implementation efficiency at the micro level to directly benefit market players, boost employment, and enhance market expectations.

China Securities Journal attributed the A-share market's positive start in July to the two-month consecutive expansion of the manufacturing sector. The Shanghai Composite Index rose by 1.29 percent, the Shenzhen Component Index climbed by 0.89 percent, and the ChiNext Index increased by 1.03 percent on Monday morning.