China's manufacturing activity shrinking says fresh report

China's manufacturing industry is a key indicator of the economy's health

China's manufacturing sector contracted in February, according to a new report.

The HSBC Purchasing Managers' Index (PMI), which measures activity in smaller factories, fell to 48.5 in February from 49.5 in January - with Chinese New Year a possible factor.

China's official PMI, which was released on Saturday and measures activity in big factories, fell to an eight-month low in February of 50.2 from 50.5 in January.

A reading above 50 indicates expansion.

Manufacturing is a key driver of China's growth, but the data may have been affected by the Chinese New Year when many factories were shut and workers went home in late January and early February.

Expectations for the official PMI survey were for a reading of 50.1, while the HSBC reading came in as expected, marking the third straight monthly decline and a seven-month low.

"Signs are becoming clear the risks to GDP growth are tilting to the downside," Hongbin Qu, chief economist for China at HSBC, said in a statement.

"This calls for policy fine-tuning measures to stabilise market expectations and steady the pace of growth in the coming quarters."

The index that measures new orders in big factories fell 0.4 percentage points to 50.5.

The employment sub-index in the HSBC survey also fell for a fourth straight month to to 47.2 - its lowest level since early 2009.

The employment index is one of few that measures the job market on the Chinese mainland.

Despite the disappointing official PMI numbers, economists in China remained reasonably upbeat about the economic outlook .

"Judging from market demand and production in some industries, we expect economic growth to remain steady in the future," said Zhang Liqun, an economist at China's Development Research Centre, which helps compile the official PMI data.

China's annual National People's Congress, which begins on Wednesday, should see an official economic growth target announced for 2014.

Premier Li Keqiang is expected to stick with a target of 7.5% growth for this year.

In 2013, official data showed that China's economy grew by 7.7%, though many question these official numbers.