“The rise in the manufacturing index was mostly driven by a rise in the output component. The overall new orders component and export orders components rose too, but by less and they remain below 50, consistent with softening demand and a decline in exports,” analysts at Capital Economics said.

Within the manufacturing PMI, January’s new export orders subindex increased by 1.4 percentage points from the previous month, while the production subindex stood at 51.3 in January, representing an increase of 1.1 percentage points.

A reading of 49 for the new orders subindex, an increase of 0.3 percentage points from the previous month, indicated demand had improved slightly.

China’s manufacturing PMI reading had fallen for five consecutive months from April last year, and despite a brief expansion in September, fell back into contraction in October.

And the data for January suggested Beijing still needs to buttress its economic recovery, with sentiment among manufacturers having dampened amid lukewarm demand, while the property sector – an economic pillar that spans numerous industries – remained in doldrums.

A protracted local government debt crisis and external complexities, including waning overseas orders, have also added to the headwinds, with more measures urged to boost the economy as Beijing is again expected to set a growth target of around 5 per cent for this year.

China’s numerous small and medium-sized enterprises, though, continued to struggle at the start of this year, with improvements in profitability and prospects lagging behind their larger peers.

The PMI readings for medium-sized enterprises stood at 48.9, up marginally from December’s 48.7, while the reading for small enterprises dropped to 47.2.

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By contrast, more than 70 per cent of large manufacturers had a capacity utilisation rate of 80 per cent or more, and were releasing production capacity quickly.

Some key subindexes also presented a gloomy picture, as the seasonally-adjusted production and operation activity expectation index fell to 54 in January from 55.9 in December.

The manufacturing sector employment subindex dipped to 47.6, a decrease of 0.3 percentage points from December, in a sign that hiring and the job market remained depressed and firms struggled to keep employees on the payroll.

The non-manufacturing PMI – which measures business sentiment in the services and construction sectors – continued to improve in January, climbing to 50.7 from 50.4 in December.

But the seasonally-adjusted construction sector business activity subindex slumped to 53.9 in January from 56.9 in December, indicating persistently bleak sentiment in China’s property sector.

“Overall, the PMI data shows that China’s economy remains relatively soft, as confidence remains weak. Until forward-looking indicators such as new orders return to expansion, economic momentum is likely to remain tepid,” said Lynn Song, chief economist for Greater China at ING.

“Employment remaining in contraction in both the manufacturing and non-manufacturing surveys also indicates that the job market remains weak, which will continue to be a headwind to consumption.”

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“We think growth will recover further in the near-term thanks to policy support. But the current approach to stimulus won’t address the economy’s structural problems, which will continue to weigh on medium-term growth,” added the analysts at Capital Economics.

“[The PMI figures] add to evidence that growth momentum in China is in the midst of a renewed recovery, albeit one that remains on shaky foundations and is unlikely to be sustained once current policy support is pared back.”