China's factory activity contracts less than expected in September — but shrinks for a fifth straight month

• The official manufacturing purchasing managers' index came in at 49.8 in September, compared with 49.1 in August, 49.4 in July and 49.5 in June.
• The data slightly beat the 49.5 expected among economists polled by Reuters.
• Headwinds for the manufacturing sector has continued to mount as a prolonged economic slowdown and property crisis dampen domestic demand.

China's factory activity contracted for a fifth consecutive month in September as the world's second-largest economy struggles to revive its growth momentum.

The official manufacturing purchasing managers' index came in at 49.8 in September, compared with 49.1 in August, 49.4 in July and 49.5 in June, according to data from the National Bureau of Statistics released on Monday. 

A PMI reading above 50 indicates expansion in activity, while a reading below that level points to contraction. The data beat the 49.5 expected among economists polled by Reuters.

Zhao Qinghe, senior statistician at NBS, said that the overall economic sentiment has improved with PMI rising to 49.8%, and that manufacturing activities have picked up speed, with high-tech manufacturing and equipment manufacturing continuing to lead.

However, China's Caixin PMI was 49.3, compared to 50.4 in August, according to the private survey compiled by S&P Global. The Caixin data released on Monday indicated that China's manufacturing sector experienced its sharpest contraction in 14 months in September, driven by declining demand and a weakening labor market.

The Caixin series tends to be more tilted towards exporters and private sector firms, Erica Tay, director of macro research at Maybank Investment Banking Group, told CNBC. She added that the plunge in new orders is not unexpected.

"This year, manufacturers have been engaging in fierce price competition, in order to move volume. This tends to incentivize buyers to stock up. The latest data suggests that bargain-hunters have purchased what they need for the near term," said Tay.

Headwinds for the manufacturing sector has continued to mount as a prolonged economic slowdown and property crisis dampen domestic demand. Meanwhile, Western restrictions on Chinese exports, including electric vehicles, has added to concerns. 

The data is the latest in a slew of disappointing Chinese economic signposts. The world's second-largest economy is still struggling with weak domestic demand, a downturn in the housing sector and rising unemployment.

China's industrial profits in August plunged by 17.8% from a year ago, marking the largest decline in over a year, according to data released by the National Bureau of Statistics on Friday.

China's retail sales, industrial production and urban investment all grew at a slower pace than anticipated last month, with retail sales increasing by 2.1% and industrial production rising by 4.5% from a year ago.

Last week, The Chinese government intensified its efforts to shore up the country's lackluster economic growth. The People's Bank of China cut the reserve requirement ratio or RRR, the amount of cash that banks need to have on hand as reserves, by 50 basis points. It also lowered the seven-day reverse repurchase rate from 1.7% to 1.5%, a decrease of 20 basis points.

China's top leaders on Thursday also convened a high-level meeting chaired by President Xi Jinping, where they called for an end to the property decline, and emphasized the need for stronger fiscal and monetary policy support.

Following the announcements, Chinese equity markets rallied, with markets clocking their best week in almost 16 years.

Andy Rothman, investment strategist at Matthews International Capital Management, noted that the latest PMI survey was conducted before last week's stimulus announcements were made.

"But even if it wasn't, it's a good opportunity to reflect that it's going to take time for this to work," he told CNBC. "It's just a small part of a process of trying to restore confidence among China's consumers and entrepreneurs."