Manufacturing activity in China may be showing signs of improvement, with operating conditions deteriorating at slowest pace in 13 months thanks to government efforts to stimulate the economy and prop up growth.

The latest Caixin China manufacturing purchasing managers' index (PMI) rose to 49.7 in March from 48.0 in February. And while this remains below the crucial no-change 50.0 value that separates an expansion in manufacturing activity from a contraction, it was nevertheless the highest index reading in 13 months.

The indicator, published by Caixin and research firm Markit, is compiled from replies to questionnaires sent to purchasing executives in over 420 manufacturing companies. It is designed to provide a single figure snapshot of operating conditions in the manufacturing economy.

As well as higher manufacturing production in China during March, survey data also pointed to a renewed rise in total new work – although again the rate of expansion was marginal. Weak foreign demand remained a drag on new order growth, however, with new export business falling for the fourth month in a row.

Firms also continued to cut their staff numbers, with the rate of job shedding easing only slightly from February's post-recession seven-year record. Lower employment was generally attributed to company downsizing policies that were implemented to cut costs.

Companies also maintained relatively cautious stock policies, with inventories of inputs and finished goods both falling again in March.

Meanwhile, companies signalled renewed inflationary pressures as both input costs and prices charged rose for the first time since July 2014, albeit at modest rates. The rate of inflation was modest overall, with a number of monitored firms commenting on higher raw material prices.

In line with higher production costs, companies raised their prices charged in March. Though the rate of increase was only moderate, it was the first time that charge inflation has been recorded for 20 months.

Finally, vendor performance deteriorated in March, with some companies citing stock shortages at vendors. That said, the rate at which times lengthened was only slight.

Dr He Fan, chief economist at Caixin Insight Group, said a month-on-month improvement in all categories of the index contributed to the 1.7 points rise in the reading in March.

"The output and new order categories rose above the neutral 50-point level, indicating that the stimulus policies the government has implemented have begun to take hold.

"However, considering that current conditions remain uncertain, the government needs to continue with moderate stimulus measures to reinforce market confidence."