Chinese factory output fell for a second straight month in December, boosting expectations that more stimulus measures will be needed to avoid a sharper slowdown amid slowing activity in the world's second-largest economy.

The flash HSBC/Markit China manufacturing purchasing managers' index (PMI) slipped to 49.5 from a final reading of 50 in November, contracting for the first time in seven months. The 50-point level separates growth from contraction.

"This means that China is leaving this year on a very weak note," Frederic Neumann, MD & co-head of Asian economics at HSBC, told CNBC. "We see a contraction in the manufacturing sector. Even new orders - a forward-looking indicator - points to further weakness ahead. I think they need to ease more just to right the ship again."

"We think next year growth will be around 7.3 percent, but that's contingent upon [the central bank] easing more," Neumann added. "If they just let this [continue] at the current pace, probably growth will head to a 6 [percent] handle, so more monetary easing and rate cuts are needed to add some spice to the economy."

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The data followed below-view readings on Chinese trade and inflation figures last week, which increased speculation that the People's Bank of China could undertake easing measure to support the economy. The central bank cut interest rates for the first time in two years in late November as growth appeared on course to undershoot the 7.5 percent 2014 target set earlier in the year.

Over the weekend, a central bank paper said that growth could slow to 7.1 percent in 2015.

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"Data from China will be very interesting in coming months, particularly after the People's Bank of China's chief economist Ma Jun downgraded 2015 growth to 7.1 percent, citing the Fed's actions as a key reason," Stan Shamu, market strategist at IG, said in a note Tuesday morning.