Economy on path of steady growth

But new orders from within China, representing domestic demand, remained sluggish. "The lack of sustainable growth momentum warrants stronger policy support. We expect both monetary and fiscal policy to be loosened gradually over the coming months," Qu said.

The survey results augured well for other key monthly economic data expected to be released on Sunday, and gave a fillip to Asian stock markets.

Manufacturing under lingering pressure

Feb manufacturing PMI drops to 50.2

China's economy has had a bumpy ride this year as data showed an extensive cooling in investment, retail sales and factory output, feeding concerns that growth could fall further from the 18-month low seen between January and March.

In the face of disappointing data before May, the central government announced "targeted easing" to prevent the economy from slowing, although it made no shift in the overall direction of its macroeconomic policies.

In a statement released on Friday, the State Council, China's cabinet, said it will lower the reserve requirement for banks that have extended a certain amount of loans to rural borrowers and smaller companies. Though details are not yet known, the cut in the ratio will free up additional cash for loans.

The statement also included a promise for the central bank to disburse more loans to commercial banks through a system known as "re-lending".

Zhu Baoliang, an economist at the government think tank State Information Center, said the earlier pro-growth measures, including faster investment in railways and public housing, and a tax break for small firms, have produced positive effects on the economy.

But unless long-term structural problems such as industrial overcapacity and local government debt were solved, it would be difficult for the economy to enter a robust upward cycle seen in the current US economy.

He estimated the economy in the second quarter could see a quarter-on-quarter rise in growth, but year-on-year growth may be the same as the first quarter's 7.4 percent.

China accelerates as euro zone stumbles

China's manufacturing PMI rises to 50.3% in March