THE flash HSBC Purchasing Managers' Index (PMI), a measure of factory activity for May fell to 49.6 a decline from 50.4 in April, indicating the first contraction of manufacturing growth since October, Reuters reports. 
A sub-index measuring overall new orders dropped to 49.5, the lowest since September, showing domestic consumption's inability to offset lower global demand. 
The PMI reading, in addition to reduced China growth forecasts from global financial institutions, has cast doubt on Beijing's 2013 growth target of 7.5 per cent.
Societe Generale economist Yao Wei told Reuters indications are that Beijing will do nothing for now, reserving action if growth falls below seven per cent.
Agreeing, Nomura chief China economist Zhiwei Zhang said: "We believe the government will not loosen monetary policy to stimulate the economy in the second quarter."
Chinese Premier Li Keqiang said the country has limited ability to deploy government spending or policy stimulus to spur growth.
UBS downgraded its 2013 growth target for China to 7.7 per cent, from eight per cent, and Societe Generale is in the midst of lowering its estimates. Bank of America-Merrill Lynch cut its China 2013 growth forecast earlier this month to 7.6 per cent from eight per cent.
The PMI survey showed new export orders were below the 50-point level in May, though the rate of decline slowed from April.
Foreign demand remained weak due to a slow US recovery and Europe's nagging debt crisis.
Of the China-listed companies posting first-quarter results, 67 per cent missed market expectations, ThomsonReuters data showed.