The HSBC/Markit index of the manufacturing sector accelerated less than expected in May, rising to 49.1 from a 12-month low of 48.9.
Economists anticipated the gauge would rise to 49.3. A reading below 50 indicates the manufacturing sector is contracting.
Markit economist Annabel Fiddes said the survey pointed to "further deterioration in operating conditions in April, with production declining for the first time in 2015 so far."
“Moreover, softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the nearterm, as companies tempered production plans in line with weaker demand conditions.”
China started 2015 by growing at its slowest quarterly pace since 2009. The latest signs have underscored a lack of momentum this quarter. Retail sales slowed to their lowest since 2006 in April, while industrial output missed forecasts and exports and
Despite the economic slowdown, China's Shanghai Composite is up 37 per cent this year, as Beijing undertakes efforts to counter the slowdown.
Last week Beijing loosened the control on financing of local government financing vehicles, a move Deutsche Bank analysts called "the most significant policy easing so far in 2015."