Activity in China's mammoth factory sector edged up to a four-month high in February but export orders shrank at their fastest rate in 20 months, a private survey showed, seeming to make the argument for more policy support.
The flash HSBC/Markit Purchasing Managers' Index (PMI) inched up to 50.1 in February, just above the 50-point level that separates growth in activity from a contraction on a monthly basis.
Economists polled by Reuters had forecast a reading of 49.5, little changed from January's final PMI of 49.7.
But even as factory activity grew marginally, the survey suggested that manufacturers still faced considerable risks from weak foreign demand and deepening deflationary pressures.
While domestic demand picked up slightly, the new export orders sub-index shed three hefty points from January to skid to 47.1, the sharpest rate of contraction since June 2013.
Input and output prices also fell. Though prices did not drop as sharply as they did in January, the trend pointed to further pressure on companies' profitability.
Employment in factories shrank as well for the 16th-straight month as firms dismissed workers to adjust to slower business.
Weighed down by a cooling property market, industrial overcapacity and slowing investment, China's economy grew 7.4% in 2014, its slowest expansion in 24 years.
Economists expect growth to cool further to 7% in 2015, even with additional stimulus measures.
