Analysts said that modest stimulus measures unveiled by the government recently may be starting to have some effect on the economy, although more such measures might be needed.
The initial or "flash " HSBC manufacturing purchasing managers index came in at 49.7--better than the 48.1 reported in April--its strongest showing in five months. But the reading was still below the 50 level that separates contraction from the previous month--and it has been stuck in contraction territory every month this year.
"Tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs," said HSBC economist Qu Hongbin. "We think more policy easing is needed to put a floor under growth in the coming months."
But the new signs of strength were fairly broad based, as new orders and new export orders were better even though employment was weaker.
China recorded weaker economic growth of 7.4% year over year in the first quarter, down from 7.6% in the final quarter of last year. That has led some economists to question whether the nation will meet its target of about 7.5% growth for the full year.
But Beijing has already rolled out some "mini stimulus' measures that could boost manufacturing and economic growth in the coming months.
Last month, the government said it would speed up some infrastructure spending on badly needed railways and offer more tax breaks. More recently it pledged to make funds available for export tax rebates.
China has also seen some signs of improvement in the export sector as overseas shipments showed a modest upturn of 0.9% year on year in April after a 6.6% drop in March.
Richard Silk and Liyan Qi contributed to this article.
Write to Richard Silk at richard.silk@wsj.com
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(END) Dow Jones Newswires
May 21, 2014 22:10 ET (02:10 GMT)
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