China's manufacturing activity fell to a four-month low in March, HSBC said Thursday, raising worries over slowing growth in the world's second largest economy.
HSBC's preliminary Purchasing Managers Index (PMI) stood at 48.1 in March, down from 49.6 in February, the British banking giant said in a statement.
This marked the fifth month that China's manufacturing activity has remained in contraction. A reading above 50 indicates industry is expanding, while a reading below 50 suggests it is contracting.
HSBC's chief economist for China Qu Hongbin said weakening domestic demand combined with a contraction in exports were weighing on manufacturing, bolstering the case for China to ease monetary policy to spur economic growth.
"Growth momentum could slow down further amid a combination of sluggish new export orders and softening domestic demand. This calls for further easing steps from the Beijing authority," he said in the statement.
China's central bank last month cut the amount of cash banks must hold in reserve for the second time in three months as policymakers moved to boost lending and spur economic activity.
Beijing has pledged to "pre-emptively adjust and fine-tune" economic policy to prevent a hard landing, which could trigger widespread job losses in the key manufacturing sector and spark social unrest.
China's economy expanded by an annual 9.2 percent last year, narrowing from 10.4 percent in 2010, and the government has set a target of 7.5 percent this year.
