China's manufacturing activity contracted in December while foreign direct investment fell for the first time in 28 months, data showed Thursday, as crises in the US and Europe drag on the economy.

The bleak data came as a senior government researcher forecast exports growth would halve in 2012 from this year and pull the pace of economic expansion below nine percent for the first time in more than a decade.

Mounting evidence that China is slowing will ratchet up pressure on Beijing to further loosen monetary and fiscal policies to prevent the world's second biggest economy from suffering a painful hard landing.

The preliminary HSBC purchasing managers' index (PMI) reached 49 in December, slightly up from 47.7 in November -- the first contraction in nearly three years -- as consumers from New York to Paris cut back on holiday spending due to deepening economic woes.

A reading above 50 indicates the sector is expanding while a reading below 50 suggests a contraction. The final figure will be released on December 30.

"With inflation quickly shifting to disinflation, the Chinese government can and should make more aggressive easing on both fiscal and monetary fronts to stabilise growth and jobs," HSBC chief economist Qu Hongbin said.

Qu also warned that "growth momentum remains weak, with additional downside risks from exports and the property market not yet fully filtering through".

Other data showed China's foreign direct investment in November fell 9.76 percent from a year earlier to $8.76 billion, the first year-on-year decline for a single month since July 2009, the commerce ministry said.

China took $103.77 billion in the January-November period, up 13.15 percent from a year earlier, but slower than the 16 percent growth rate in the first 10 months, as US investment plunged 23.05 percent and European investment rose an anaemic 0.29 percent.

"The foreign trade situation next year is still very unclear, but it will be very severe in the first quarter due to the grim and complicated world economic outlook," commerce ministry spokesman Shen Danyang warned.

Chinese exports are expected to grow 10 percent next year, compared with a forecast 20 percent, and drag economic growth below nine percent for the first time in more than a decade, government researcher Yu Bin told reporters.

But a "sharp plunge" in economic growth was unlikely because domestic consumption was expected to pick up, said the director general of the macroeconomic research department under the State Council, China's cabinet.

Despite the increasingly bleak outlook, Chinese leaders on Wednesday vowed to maintain a "prudent monetary policy and proactive fiscal policy" in 2012, suggesting they will move cautiously to open credit valves.

Policymakers are anxious to prevent a sharp slowdown in the economy but at the same time they want to avoid reigniting inflation, which hit a more than three year high of 6.5 percent in July and has the potential to trigger unrest.

Late last month China cut the amount of money banks must hold in reserve for the first time in three years to spur lending and counter turmoil in Europe and the United States that threatens to derail the economy.

Analysts expect the government to further ease credit restrictions in the coming months as well as cut taxes for households and businesses and ramp up investment in infrastructure, such as social housing.

So far Beijing appears to have ruled out another massive stimulus plan like the one unveiled in late 2008 to combat the global financial crisis, with Yu telling reporters it was not "advisable" given the still-strong inflationary pressures in the economy.

In November manufacturing activity contracted for the first time in 33 months, while consumer prices rose at their weakest pace in more than a year and industrial output growth hit its lowest level in more than two years.