Manufacturing activity improved in China in March, separate surveys showed Friday, helping ease concerns over the health of the world's second-largest economy.
China's official manufacturing Purchasing Managers' Index (PMI) came in at 50.2 for March, above a forecast of 49.3 from a Reuters poll, returning to growth for the first time since July. That compares with 49.0 in February, which was the lowest reading since 2011.
China's official services PMI rose to 53.8 in March from 52.7 in February.
Levels below 50 signal contraction, while levels above indicate growth.
A similar improvement was seen in the Caixin manufacturing PMI for March, which rose to 49.7 from 48.0 in February, marking the first increase from the previous month in a year.
The Caixin survey focuses on smaller and medium-sized enterprises, while the official data target larger companies.
"All categories of the index showed improvement over the previous month," He Fan, chief economist at Caixin Insight Group, said in the data release.
"The output and new order categories rose above the neutral 50-point level, indicating that the stimulus policies the government has implemented have begun to take hold," he said.
But he added that the government needed to continue the stimulus to reinforce market confidence.
Signs of improvement in the official survey came as concerns over slowing economic growth had depressed market sentiment.
Richard Jerram, chief economist at the Bank of Singapore, said the growth in the official PMI was a surprise, while the improvement in the services index was also "quite impressive."
"It looks to be too big an improvement to be random noise. Some of the policy easing is getting a bit of traction. That's the most realistic interpretation," he said.
In a note Friday, economists at ANZ attributed the surprising strength to an acceleration of infrastructure spending and a recent pick up in electronic supply chains, noting the steel industry PMI also rose to 49.7 from 49.0 in February.
Semiconductor and ICT, or information and communication technology, exports also picked up, ANZ said.
In the wake of the data, the Australian dollar rose to $0.7682, from around $0.7664 before the release, although it retreated back to around $0.7667 at 9:56 a.m. SIN/HK time.
Australia's benchmark S&P/ASX 200 index retraced some of its early losses, trading down 1.0 percent, compared with losses of as much as 1.5 percent before the release, although that index also later retreated.
China is a key export market for Australia's resources.
But some said the recovery in the official PMI wasn't entirely surprising.
"We have seen the stronger commodity price in March, contributing to the strength of the PMIs," said Tommy Xie, an economist at OCBC Bank Global Treasury Research, although he added that the magnitude of the improvement was a surprise.
An improvement in March compared with February is also typical, he noted, although this year's was "quite strong." The Lunar New Year holidays usually are held in either January and February, leading to factory closures. This year, the holiday was in February.
Xie noted that there are other signs of improvement, including better profit in the manufacturing sector in the first two months of the year.
He also cited stabilization of the Chinese currency, called the renminbi or yuan, as a factor in the improved data. The renminbi had fluctuated quite a bit at the beginning of the year as the country switched to pegging the currency to a basket of its trading partners' currencies instead of the dollar. Xie also noted that the recovery in China's stock markets boosted confidence.
The data indicate that China's economy may be regaining some steam after its recent slowdown.
China's economic growth rate slowed to a 25-year low of 6.9 percent in 2015, as the economy continues to shift away from its manufacturing roots. To counter slowing growth, China's policy makers have taken a slew of easing measures, including interest rate and reserve requirement ratio cuts from the central bank, the People's Bank of China.
The slowing growth was a spur to U.S. ratings agency Standard & Poor's (S&P), which on Thursday cut China's credit rating outlook from stable to negative, citing increasing economic and financial risks to the mainland government's creditworthiness. The move is a signal that the agency may lower China's rating from AA minus in the next six months to two years.
S&P forecast China's economic growth would remain at or above six percent annually over the next three years — marginally below the 6.5 percent growth targeted in China's latest five-year plan.
Moody's Investors Service had also lowered the outlook on China's debt rating to negative from stable earlier this month.
-Katy Barnato contributed to this article.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1