Things Are Looking Bad Outside China, Too
Global growth engine China isn't the only economy exhibiting signs of weakness, with the Asia's other major exporters also witnessing a downturn in manufacturing activity, according to monthly HSBC purchasing managers index (PMI) readings published on Monday.
HSBC's China PMI fell to 49.2 in May, the lowest level since October 2012 and down from April's final reading of 50.4. A reading above 50 indicates expanding activity and one below 50 signals contraction.
Taiwan's PMI dropped to 47.1 in May from 50.7 in April, its first fall in six months, and South Korea's May PMI slipped to 51.1 compared with 52.6 in the previous month.
Meanwhile, in the euro zone, PMIs for May ticked higher but were still in contraction territory. For the bloc as a whole the number rose to 48.3, above expectations of 47.8.
"We are actually getting increasingly worried. The numbers have disappointed. Not just in China but throughout the Asia-Pacific over the last couple of months," Frederic Neumann, co-head, Asian economic research at HSBC told CNBC Asia's "Cash Flow."
"And it is not just a slowdown in exports. We also see some weakness in domestic demand coming through as well," he said.
(Read More: Surprise! China Stocks Are May's Best Performers)
And with major trading partner, the euro zone, entrenched in a recession, experts said it would be difficult for export-driven Asian economies to stage a sizable recovery in the months ahead.
Last week, the Organization for Economic Co-operation and Development (OECD) cut its 2013 growth estimates for the currency bloc, forecasting that it would shrink 0.6 percent compared with an earlier estimate of a 0.1 percent contraction.
"It's going to be a fairly hard slug for emerging markets before they get their growth moving again. We're not seeing much in the data to make us think it's going to be anything other than a gradual recovery," said Geoff Lewis, global market strategist at JP Morgan Asset Management.
However, he added that developing economies in Asia are likely to hold up better than their Latin American peers which are more dependent on commodity exports.
China: Official PMI vs HSBC PMI
The Chinese government's official PMI released over the weekend came in at a stronger than expected 50.8 in May from 50.6 in the previous month. Still, some economists believe the HSBC survey is a more accurate reflection of the depth of the slowdown in China.
"It seems that the HSBC PMI is more consistent with reality this time. The official PMI beat market expectations and improved in May, inconsistent with other indicators and anecdotal reports on China's manufacturing sector," said Raymond Yeung, senior economist at ANZ bank, adding that economic conditions in the country are softening.
(Read More: Chinese Consumers Are Still Not Spending Enough)
Both the official and HSBC PMI highlight a key worry that robust credit growth is not translating into a notable pickup in economic activity, said JPMorgan's Lewis.
"Both PMIs are disappointing in the sense that we're not seeing signs that the big credit impulse in the first quarter is feeding through into activity yet," he said. Total Chinese social financing, a broad measure of credit, grew 58.2 percent in the first quarter, compared to the same period a year earlier.
Analysts say softness in the manufacturing sector is unlikely to trigger additional stimulus by the central bank or government.
Current levels of activity are consistent with gross domestic product (GDP) growth above the government's annual target of 7.5 percent, said Xianfang Ren, senior economist at IHS Global Insight.
(Read More: Guess Which Country Is Growing Faster Than China?)
"Growth needs to fall to 7.4 percent in order to push policymakers into action," said Ren, who expects growth to remain in a narrow band of 7.7 to 8 percent in the coming quarters.
— By CNBC's Ansuya Harjani