The Chinese economy is showing tentative signs of recovery, but analysts said that it was still too early to declare that the worst of the downturn was over.

The official purchasing managers' index (PMI), a key gauge of Chinese manufacturing, improved in February for the third month in a row as factories restocked in anticipation of an early revival in the economy despite deepening global gloom.

However, the index remained below the no-change line of 50 that marks the difference between expansion and contraction for the fifth month in a row. However, it was well clear of a record low of 38.8 that it plumbed in November. The rise in the gauge to 49.0 from 45.3 in January was encouraging but it was too early to be confident about a marked pick-up in final demand.

A key factor in the bottoming out of the index was the announcement by the Government last November of a 4 trillion yuan (£550 billion) stimulus spending package to make up for a collapse in Chinese exports and a downturn in the domestic property sector.

Every sub-index in the official PMI, released by the China Federation of Logistics and Purchasing (CFLP), rose in February. Output and new orders climbed to 51.2 and 50.4, respectively, both returning to mild growth after shrinking for four months.

Optimism that the economy could be bouncing back has been reinforced by a surge in lending. New local currency loans hit a record 1.6 trillion yuan in January, and local media reported that banks lent about 1 trillion yuan in February, a sum that is still extremely high by historical standards.

However, Li Yang, a researcher with the Chinese Academy of Social Sciences, the top government think-tank, said that the PMI mainly reflected the views of high-level corporate managers and not necessarily the outlook for the broader economy. "They have reached a certain consensus about the government's policies and measures to boost growth — they approve of them. But for the entire economy to improve, we need the broader society to see things rebounding. That still needs time," Mr Li said.

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