BEIJING—Chinese workers returned to factory floors in March, but operations remained slow because of sluggish demand, damping hopes for a speedy recovery as the coronavirus pandemic continues to paralyze the global economy.

Chinese factory activity expanded in March, after sharp contractions in January and February, when Beijing locked down much of central Hubei province and took other drastic measures to contain the virus. However, smaller companies appeared to lag behind larger companies, many of them state-owned enterprises,...