China's factory activity skidded to a three-year low point in January, adding to further gloom about the state of the world's second-largest economy.

The government-compiled January manufacturing purchasing manager's index (PMI) came in at 49.4, slightly missing Reuters consensus estimates for a 49.6 reading and ticking down from December's 49.7 figure. It was the weakest result since 2012 and marked the sixth straight month in contraction territory.

The mood was worsened by a private survey by Caixin and Markit that showed January manufacturing activity shrinking for the eleventh straight month. Caixin's survey, which tracks smaller firms than the official indicator, came in at 48.4, compared to December's reading of 48.2.

A score below 50 indicates a contraction in the sector, while one above 50 means expansion.

"Chinese manufacturers signaled a modest deterioration in operating conditions at the start of 2016, with both output and employment declining at slightly faster rates than in December. Total new business meanwhile fell at the weakest rate in seven months," Markit said in a statement.

But helping to offset the disappointment was a separate survey also released on Monday, that showed growth in the Chinese services sector had held above the key 50 level. The January official non-manufacturing purchasing manager's index came in at 53.5, versus 54.4 in December.

As Beijing attempts to reorient its economy away from investment-fueled industrial growth and towards domestic consumption, services such as real estate and health care are becoming important indicators for policymakers; the services sector already accounts for half of Chinese gross domestic product. This new focus has led many strategists to question the value of manufacturing PMIs as lead economic indicators.

"China has been a two-track economy for the past five years. We have services growing very nicely and the lower track of the economy, which is the industrial sector, remains in a difficult position and it's not going to get out of it quickly," explained Erwin Sanft, head of China strategy at Macquarie.

Cutting over-capacity in heavy industries was key to resolving the current slump, Sanft warned.

"There's a realization that for a lot of these industries, there has to be a big downsizing," he said. "Rather than avoiding that issue, plans are now being made as to how workers can be laid off and looked after. We expect there'll be some funding from the central government."