The steep fall in the HSBC flash purchasing managers' index (PMI) to 48 in November from 51 in October largely reflected domestic weakness as both output and new orders shrank even as export orders continued to grow.

The flash PMI, the earliest readout of China's industrial activity, was the lowest since March 2009 and suggests the factory sector contracted during the month. A PMI reading of 50 demarcates expansion from contraction.

The PMI unnerved financial markets already roiled by the euro zone debt crisis and a downward revision in U.S. economic growth and underscored expectations that Beijing will lean more on policies to support growth than ones to fight inflation.

"They are not going to want this to go too far," said Tim Condon, head of Asia research at ING in Singapore. "I'm not sure if it (PMI) is a tipping point but I think it adds to the evidence."