China's manufacturing activity unexpectedly picked up pace in September on strong orders, a private survey showed on Tuesday, but the optimism was offset by factory employment which slumped to a five-and-a-half year low.
The HSBC flash manufacturing Purchasing Managers' Index (PMI) rose to 50.5 from a final reading of 50.2 in August, better than expectations for a reading of 50, which separates expansion from contraction.
The Australian dollar initially rose 0.2 percent against the U.S. dollar on the news, but gave up the gains soon after. Asian stocks were mixed with the Shanghai Composite outperforming the region, up 0.8 percent.
"This is an improvement compared to what markets are expecting [but] If we just look at recent numbers, this is just hovering at 50. So the bigger picture shows that it is growing but only marginally and very slow compared to past standards," John Zhu, Greater China economist at HSBC, told CNBC following the data.
Markets have become increasingly jittery over the performance of China's economy after a disappointing showing in recent months. Industrial production growth in August slowed to its lowest level since the 2008 global financial crisis, while its economically vital property market slid for a fourth straight month.
The PMI sub-indexes also uncovered worrying signs about the job market. A measure of employment shed more than a point, dropping to 46.9 - its lowest since February 2009 when a collapse in exports threw tens of millions of Chinese out of work.