China's factory activity contracted at the sharpest rate in 23 months in January, underscoring the huge economic costs from the country's "COVID zero" approach as surging cases and tough containment measures weighed on output and demand, a private survey showed Sunday.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 49.1 in January — its lowest level since February 2020, when the economy was still suffering from country-wide COVID-19 lockdowns in the early days of the pandemic.

Economists in a Reuters poll had expected the index to ease to 50.4 from December's 50.9 but still point to some growth. The 50 mark separates growth from contraction on a monthly basis.