HONG KONG -- The HSBC China Composite PMI data, which covers both manufacturing and service sectors in the country, signaled a further expansion of output in September, and the rate of expansion remained modest, with the index posting at 51.2 in September, easing from 51.8 in August, HSBC said in an emailed press release on Tuesday.

Manufacturers reported a further increase in order book volumes last month, however, the rate of increase was unchanged from August's marginal pace, the report said. Meanwhile, at service providers, new order growth slowed from August, but was nonetheless marked.

Employment levels at Chinese manufacturers declined for the sixth month in a row in September, and the rate of job shedding was moderate and broadly unchanged from August. In contrast, staffing levels increased at service providers, following a reduction one month previously.

The input costs faced by manufacturers increased at the fastest rate since February. Service providers also reported higher input costs, though the rate of inflation was modest and below-trend. Both manufacturers and service providers passed on higher input costs to clients by raising their output prices in September. The rates of increase were modest across both sectors.

Service sector firms operating in China expected activity levels to be higher in one year's time. However, the degree of positive sentiment was the second-weakest in the series history.

Qu Hongbin, Chief Economist, China and Co-Head of Asian Economic Research at HSBC said China's services activity growth appears to be stabilizing at a faster pace than in the second quarter and this led to a renewed expansion of employment from the contraction in August.

"Combined with the gradual improvement of the manufacturing PMI, the Chinese economy is still on the way to a modest recovery. But a more consolidated and sustainable recovery requires structural reforms," he said.