China's factory activity unexpectedly shrank in October after returning to expansionary territory the month before, official data showed on Tuesday, reflecting subdued demand and shoring up the case for further steps to consolidate recovery.

Meanwhile, citing the better-than-expected third-quarter performance and a series of stimulus policy measures, experts said China's economy remains on a steady recovery track, and they expect the GDP will expand by over 5 percent in 2023, above the annual growth target of around 5 percent this year.

China's official purchasing managers index for the manufacturing sector fell to 49.5 in October from 50.2 in September, below the 50-point level that separates contraction from growth, the National Bureau of Statistics said on Tuesday.

"The level of economic prosperity has fallen in China, and the foundation for continued recovery still needs consolidation," Zhao Qinghe, an NBS statistician, said in a statement posted on the bureau's website.

Zhao said China's manufacturing activity contracted in October due to factors such as the combined Mid-Autumn Festival and National Day holiday, and the advance release of some demand before the extended break.

Zheng Houcheng, chief macro economist at Yingda Securities, said the reading was the lowest in three months, with subindexes for output and new orders all declining, suggesting that China's broader economy is still facing headwinds.

The subindex for production came in at 50.9 in October, down from 52.7 in September, while the gauge for new orders declined to 49.5 in October from 50.5 in September, the NBS said.

China's nonmanufacturing PMI came in at 50.6 in October, down from 51.7 a month earlier. Also, the country's official composite PMI, which includes both manufacturing and nonmanufacturing activity, came in at 50.7 in October compared with 52 in September, the NBS said.

Zhou Maohua, an analyst at China Everbright Bank, said the decline in the manufacturing PMI shows recovery in domestic demand is still tepid, affected by seasonal factors as well as the housing market slump.

Considering the robust macro policy support and the strong optimism among manufacturers, Zhou said the manufacturing PMI will gradually pick up in the coming months.

Meanwhile, he called for more efforts to support the real economy amid a cloudy global outlook and stresses in the property sector.

In fact, China's economy has shown signs of recovery with the help of a raft of supportive measures implemented in recent months.

"China's growth rate increased sequentially in the third quarter, supported by improved private consumption and net exports. This strong quarterly performance, alongside favorable base effects in the fourth quarter, mean that meeting the official growth target of 'around 5 percent' is now probably assured," said Louise Loo, lead economist at British think tank Oxford Economics. "We expect GDP will expand by 5.2 percent in 2023," Loo said.

"The darkest hours of the economy are certainly behind us, and we can view late-2023 and 2024 with more optimism," said Xu Tianchen, senior economist at the Economist Intelligence Unit. "The economy will be helped by a gradual recovery of global demand for goods, which benefits China's exports. The positive effect of supportive policies — including measures to boost private enterprises — will also be felt, though with a lag."

Xu said China has ample policy room to step up support for the world's second-largest economy.

"Fiscally, the leveraging ratio at the central government level is very low by international comparison, while a sizable public sector also hoards large amounts of assets and financial resources that can serve fiscal purposes," Xu said.

On the monetary side, Xu said there is still ample scope for cuts to policy rates and the reserve requirement ratio, and the central bank can monetize government debt at times of urgency. "More rate cuts within 2023 are unlikely in my view, but policy rates will only go down in the longer term in line with China's slowing potential growth."