Chinese manufacturing contracted in May for the seventh consecutive month as exports deteriorated, British banking giant HSBC said Thursday, arguing the data showed the need for more policy easing.
HSBC's purchasing managers index (PMI), which measures factory output, fell to 48.7 in May from 49.3 in April, the banking group said in a statement.
A reading above 50 indicates expansion, while a reading below 50 suggests contraction.
HSBC linked the contraction to worsening conditions in the export sector, arguing that the government would have to do more on top of the liquidity easing and infrastructure investment it has already undertaken.
"This calls for more aggressive policy easing, as inflation continues to slow. Beijing policy makers have been and will step up easing efforts to stabilise growth," said HSBC's chief economist for China, Qu Hongbin.
"As long as the easing measures filter through, China will secure a soft landing in the coming quarters."
China's exports grew by just 4.9 percent in April from a year earlier while the official data for May has not yet been released.
HSBC's manufacturing figures are typically more pessimistic than China's official numbers.
The HSBC survey puts more emphasis on smaller companies, which are suffering more in the economic downturn than state-owned giants.
China's economy is widely expected to slow this year as woes in key export markets such as Europe and the United States hit its overseas sales.
The government has set a target of 7.5 percent economic growth this year. China's economy grew 9.2 percent last year and 10.4 percent in 2010.