A new report shows that China's manufacturing activity continued to fall in February as export orders weakened, in a further sign that the euro zone crisis and US weakness are hurting demand.
HSBC's preliminary purchasing managers index rose to 49.7, the highest level in four months, from a final reading of 48.8 in January, the British banking giant said in a statement.
But while the figure marked an improvement it still remained below 50, indicating the sector is contracting. HSBC will release a final reading early next month.
"With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth," HSBC chief economist Qu Hongbin said. He urged China's government to step up efforts to ease credit restrictions, which would boost lending and spur activity in the export-driven economy.
On Saturday, China's central bank cut the reserve requirement ratio for banks, effectively increasing the amount of money they can lend, for the second time in three months as officials moved cautiously to open the credit valves.
The world's second largest economy expanded by an annual 9.2% last year, narrowing from 10.4% in 2010, and is widely expected to slow further this year, but most analysts do not expect to see a sharp reduction.
