China manufacturing shows modest improvement

Chinese workers toiled at a textile factory in February. The Chinse government and HSBC have painted a mixed picture for manufacturing activity.

NEW YORK (CNNMoney) -- The state of Chinese manufacturing showed modest signs of improvement in February, according to two reports issued Thursday.

But while a Chinese government report indicated modest expansion in the sector, a separate report from bank company HSBC showed a continued slight contraction.

The government's China Manufacturing Purchasing Managers Index edged up by half a point to 51. Any reading above 50 signals sector expansion.

The Chinese government report said that manufacturing "continued to maintain steady growth," but the increase was "more gentle" compared to recent years.

HSBC said its sentiment index rose to 49.6 in February from 48.8 in the prior month. The reading was just below the expansion threshold, indicating a "further worsening of manufacturing sector operating conditions," according to Hongbin Qu, chief China economist for HSBC and co-author of the report.

Chinese manufacturing: mixed signals in January

Qu wrote that manufacturing output rose at a "negligible rate" in February and jobs growth was at its highest rate in nine months. But these signs of strength were offset by an ongoing decline in intakes of new work and a "sharp" decrease in new export businesses, he said.

The reports took away some -- but not all -- fears that China faced a pronounced retreat.

"A third consecutive increase in both of China's manufacturing PMIs should dispel any lingering concern about an imminent hard landing," said Mark Williams, chief Asia economist for Capital Economics, in a report. "But with a post-Chinese New Year rebound in hiring and activity accounting for a large part of the latest rise, the apparently strong recovery may soon stall."

Asian markets were sluggish on Thursday. The Shanghai Composite (SHCOMP) in China and the Nikkei (N225) in Japan both slipped about 0.1% at the close. The Hang Seng (HSI) in Hong Kong dropped 1.3%.