BEIJING - Chinese manufacturing bounced back into expansion territory in March after two months of bad news.

The manufacturing purchasing managers' index (PMI), a key measure of factory activity, posted at 50.1 in March, up from 49.9 in February, according to the National Bureau of Statistics (NBS) and the logistics and purchasing federation.

A reading above 50 indicates expansion. The index dropped below 50 in January for the first time since October 2012.

Slower, better

The March figure was slightly above market expectations and offers hope that the world's second largest economy is gaining traction.

The improvement was due to the return to work following the New Year holiday, said Zhao Qinghe, NBS statistician. The sub-index for production rose to 52.1 from 51.4 in February.

Recent pro-growth policy had boosted confidence, Zhao said.

The People's Bank of China, the central bank, has cut benchmark interest rates twice since November and lowered the amount of funds banks must hold as reserves, freeing up cash for investment.

On Monday the bank lowered minimum down payments on second homes to prop up the sagging property market.

China's economy grew 7.4 percent in 2014, a 24-year low, described by the government as the "new normal"; slower, but better, growth. The official growth target this year is a record low of around 7 percent.

China has a full "tool kit" at its disposal and will use it if growth nears the lower end of the range, Premier Li Keqiang said in early March.