The manufacturing sector in China contracted for the seventh consecutive month in May as exports deteriorated, according to a survey by HSBC.

HSBC's preliminary purchasing managers index (PMI), which measures factory output, fell to 48.7 in May from 49.3 in April, the bank said in a statement.

A reading above 50 indicates expansion in the sector, while a reading below 50 suggests contraction.

HSBC chief economist for China Qu Hongbin said the worsening picture for the world's second-largest economy meant Beijing would have to do more to boost growth, on top of existing infrastructure investment and liquidity easing measures.

The bank will release full-month data on June 1.

"This calls for more aggressive policy easing, as inflation continues to slow," Mr Qu said.

"Beijing policymakers have been and will step up easing efforts to stabilise growth.

"As long as the easing measures filter through, China will secure a soft landing in the coming quarters."

While there are fears that a slowdown in China will hit Australian exporters, particularly in the resources sector, HSBC Australia chief economist Paul Bloxham sees China's economy improving soon as the government steps in to boost growth.

"We have in mind that growth stabilises and picks up a little bit in the second half, which will be a positive development for Australia," Mr Bloxham said.

"Of course the big risk at the moment is really what's happening in Europe, and of course that could have big ramifications for China and for Australia as well, and we are all watching Europe very closely."

China's government has set a target of 7.5 per cent economic growth this year. The economy grew 9.2 per cent last year and 10.4 per cent in 2010.

Earlier this month, the government cut banks' required reserve ratio, freeing up funds they can lend to clients, after unexpectedly low figures for April, with exports up just 4.9 per cent year-on-year and imports virtually flat from a year earlier.

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.

Small companies have a harder time securing funding from banks, and they are also typically geared towards foreign markets, so a slowdown in exports hits them harder.

ABC/AFP