China's factory output is falling in May after climbing for seven months, according to a monthly reading by the HSBC bank that predates the release of official data.

The reading of 49.6 points for May on the flash HSBC Purchasing Managers' Index, or PMI, released Thursday, indicates a contraction in manufacturing activity (readings above 50 show expansion).

That compares with a PMI reading of 50.4 points for April. Factory output in the world's No. 2 economy also expanded between October 2012 and March 2013 after contracting over the first three quarters of 2012.

HSBC's chief China economist, Qu Hongbin, said lower domestic and foreign demand has resulted in reduced Chinese manufacturing activity and it is feared the slide will continue in the second quarter of 2013.

The HSBC's flash reading and the official PMI put out by China's National Bureau of Statistics do not always coincide; on occasion, one shows expansion and the other contraction in the same month. EFE