HSBC said this was likely due to a reduction in output and new business during the month.
It was the first drop in output and new business since July last year.
HSBC said the rates of decline were mostly related to the weaker than expected client demand, a reduction in new business from abroad and a modest pace similar to January.
Decreased output requirements and fewer new orders led to a reduction in staffing levels at Chinese goods producers, with the job loss rate at its highest since March 2009.
Despite these lower payroll numbers Chinese manufacturing firms still managed to minimise outstanding business, as smaller volumes of new business allowed firms to complete unfinished work.
Purchasing activity and inventories of pre-production goods also fell over the month as companies adjusted stock levels in line with lower production requirements.
Average input costs also fell over February with the rate of input price deflation at its highest since June 2013.
HSBC attributed this to “relatively muted demand for inputs enabling firms to negotiate discounts on production materials”.
Manufacturers have also lowered their factory gate prices for the third consecutive month.
HSBC chief economist for China Hongbin Qu said the HSBC manufacturing PMI shows the “risks to GDP growth are tilting to the downside”.
“This calls for policy fine-tuning measures to stabilise market expectations and steady the pace of growth in the coming quarters,” said Mr Qu.
