Activity in China's factories shrank for a fifth straight month in March as output and new orders both weakened, a preliminary private survey showed on Monday.
The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to an eight-month low of 48.1 in March from February's final reading of 48.5.
A reading below 50 indicates a contraction while one higher than that shows expansion.
The preliminary March index showed new orders slid for a fourth consecutive month, to 46.9 -- its lowest point since July 2013, while output fell to 47.3, the lowest since September 2012.
New export orders grew for the first time in four months, suggesting that the mild slowdown China is facing, which has caused some jitters in global markets, has been driven primarily by weak domestic demand.
Another encouraging sign was a substantial increase in the employment sub-index, though the number remained below 50.
Chinese Finance Minister Lou Jiwei said in early March that a healthy labour market is more important than reaching the government's 2014 growth target of about 7.5 percent.
"Weakness is broadly-based with domestic demand softening further," said Hongbin Qu, chief economist for China at HSBC, in a comment accompanying the PMI data.
"We expect Beijing to launch a series of policy measures to stabilise growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower."
A string of weak economic indicators so far this year, including surprisingly weak exports in February, has reinforced concerns about a slowdown in the world's second-largesteconomy.
Premier Li Keqiang said last week that China will speed up investment and construction plans to ensure domestic demand expands at a stable rate.
The government has said it would like to reduce the economy's dependence on exports and enhance the role of domestic consumption, but it is unclear how much growth it might be willing to sacrifice to reach that goal.
The Chinese yuan hit a 13-month low on Friday, which traders and analysts attributed in part to attempts by the central bank to curb betting on the currency's appreciation. A weak yuan also helps exports, which stumbled in February.
The Markit/HSBC PMI is weighted more towards smaller and private companies than the official index, which contains more large and state-owned firms.
Both the final Markit/HSBC manufacturing PMI and the official manufacturing PMI for March are due on April 1.
Source: Reuters
