China's manufacturing activity fell to a four-month low in March, HSBC said Thursday, March 22, adding fuel to concerns over slowing growth in the world's second largest economy.

HSBC's preliminary Purchasing Managers Index (PMI) fell to 48.1 in March from 49.6 in February, following a sharp slowdown in exports, the British banking giant said in a statement.

A reading above 50 means expansion, while below 50 suggests contraction.

The data will add to pressure on policymakers to further loosen monetary policy and comes days after Australian resources giant BHP Billiton said China's demand for iron ore, a key manufacturing component, was flattening.

It is also the latest in a string of negative news from Beijingincluding a huge trade deficit in February and lawmakers' decision this month to set a target for 7.5 percent growth this year, from 9.2 percent last year and 10.4 percent in 2010.

The HSBC survey also said the manufacturing slump had led firms to cut back, sending employment to its lowest level in three years in March, AFP reported.