"We suggest downplaying it. The HSBC flash PMI is poor data at the beginning of the year," Lu said in a research note.

The survey period was between February 12 and February 18. The first six days in February were the Chinese New Year holiday, the most important holiday in China. Many small and medium enterprises -- which could be the majority of the HSBC PMI sample -- did not reopen until the middle of February, hence the quality of this flash PMI could be quite low, Lu explained.

In addition, PMI data are heavily seasonally adjusted, but the seasonal adjustment is quite inaccurate due to the different timing of the New Year holidays, Lu said.

China's monthly macro data in January and February are usually distorted by this effect, which is difficult to remove statistically due to the short sample periods and floating dates.

Grim outlook for small factories

"At the moment, visibility of short-term growth momentum is quite low," he said.

Macro numbers from national statistics agencies have painted a mixed picture this year. Trade and credit expansion were above market estimates and the New Year holiday sales in line with expectations, he added.

Zhang Zhiwei, chief China economist with Japan's Nomura Securities, took a relatively pessimistic view of the reading. He flagged the downside risk on Wednesday as another economic indicator -- the MNI business sentiment index -- also fell.

"We reiterate our view that the recovery in China is not sustainable," he said, adding that China's economic growth could slow to 7.5 percent in the first quarter and further fall to 7.1 percent in the second quarter.

Zhang expected the Chinese government to loosen monetary policy in the second quarter to support growth, if the growth target for 2014 is set at 7.5 percent.

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