A survey has shown that China's manufacturing activity fell to a four-month low in March, adding to concerns over slowing growth in the world's second largest economy.
HSBC's preliminary Purchasing Managers' Index (PMI) fell to 48.1 in March from 49.6 in February, following a sharp slowdown in exports, the British banking giant said in a statement. A reading above 50 means expansion, while below 50 suggests contraction.
The data will add to pressure on Chinese authorities to further loosen monetary policy and comes days after Australian resources giant BHP Billiton said China's demand for iron ore, a key manufacturing component, was flattening.
It is the latest negative news to come from Beijing following a huge trade deficit in February and a government decision this month to set a target of 7.5% growth this year, down from 9.2% last year and 10.4% in 2010.
The result marks the fifth month that the PMI has remained in contraction since reaching 47.7 in November last year.
"Growth momentum could slow down further amid a combination of sluggish new export orders and softening domestic demand," HSBC's chief economist for China Qu Hongbin said in the statement.
China's central bank in February cut the amount of cash banks must hold in reserve for the second time in three months as policymakers moved to increase lending and boost domestic consumption.
China has pledged to "fine-tune" policy to prevent a hard landing for the economy, which could trigger widespread job losses and spark social unrest.
HSBC also said the manufacturing slump had led firms to cut back, sending employment to its lowest level in three years in March.
