China's manufacturing business activity slightly expanded in May, indicated by a Purchasing Managers Index reading of 50.2, up from 50.1 in April, according to official data.
The reading has remained above 50, the separation between contraction and expansion, for three consecutive months and suggested a slow rebound of the real economy, said a statement from the National Bureau of Statistics.
The manufacturing PMI sub-components were more positive than the headline, with the new orders and production showing more meaningful rebounds, up by 0.4 and 0.3 points respectively in May from April. The employment sub-index also improved last month, the NBS data showed.
Zhao Qinghe, a senior economist at the NBS, said that China's manufacturing industry still has large downside pressure despite the rebound, as enterprises face financial strain, weak market demand, and rising labor costs.
Influenced by the outboard headwinds, both sub-components of new export orders and imports suggested contraction in May.
The non-manufacturing PMI, which covers the construction and service sectors, moderated to 53.2 in May from 53.4 in April, the weakest reading since the global financial crisis.
"The data showed early signs of a recovery in the economy amid continued policy loosening," said Song Yu, a Chinese economist at the international brokerage Goldman Sachs.
"However, we do not believe these are enough to change the overall policy direction and believe the government will likely release further loosening initiatives in the coming months until there are consistent signs of a significant growth recovery," he said.
A separate report from the United Kingdom-based lender HSBC Holdings Plc showed a third consecutive month of manufacturing contraction.
The final PMI reading in May was 49.2, a weak reading despite it being revised up from the flash reading of 49.1.
Both domestic and export orders remain in contraction, pointing to lackluster economic activities, the report said.
"Five months into 2015, the economy has shown little signs of a pickup, as policy easing was not sufficient to lift the economy out of disinflation," said Qu Hongbin, chief economist in China at HSBC.
