China's manufacturing sector showed further signs of deterioration on Thursday with activity hitting a seven-month low in February as new orders and production contracted.

The HSBC/Markit China manufacturing purchasing managers' index (PMI) fell to 48.3 in February, from the prior month's reading of 49.5. Readings below 50 indicate a contraction in the sector.

New orders experienced a sharp drop from 50.1 to 48.1. The employment component fell to 46.9 from 47.3.

"The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening," said HSBC Chief China Economist Hongbin Qu.

"We believe Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year," he added.

For Kathleen Brooks, Research Director at Forex.com, the above figures may perhaps not be as bad you might think. Amongst other things she points out how, on the whole, of late Chinese data has in fact been surprising to the upside.

Hence, Citi's economic surprise index for the country is now in positive territory and at its highest since October.

JM

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