A preliminary HSBC survey shows China's factories did better last month, though overall manufacturing activity still contracted slightly.

The HSBC flash manufacturing purchasing managers' index (PMI) recovered to 49.6 in June from May's final reading of 49.2, beating the market forecast of 49.4.

A reading of below the 50-point level indicates contraction.

A breakdown of the data shows the sub-indices of output, new orders and quantity of purchases all improved in June.

The index of new orders rose above the 50-point mark for the first time in four months.

However, the sub-index of employment shows manufacturers continued to cut their staff, with the latest reduction the sharpest in over six years.

Analysts say this indicates companies have relatively muted growth expectations as demand conditions both at home and abroad remain subdued.