The preliminary reading of HSBC's Purchasing Managers Index (PMI) rose to 51.7, from 50.4 in February, which was the lowest reading since October.
Manufacturers reported a bigger backlog of work and a faster rate of increase in purchases, and stocks of finished goods expanded.
Employment however increased at a slower rate than in February.
Inflationary pressures eased.
"March Flash Manufacturing PMI rebounded to 51.7 on the back of stronger new orders and production growth," Qu Hongbin, Chief Economist, Greater China, and Co-Head of Asian Economic Research at HSBC, said in a statement on Thursday. "This implies that the Chinese economy is still on track for gradual growth recovery.
"Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative in a bid to sustain growth recovery," he added.
China's economy expanded 7.8 percent in 2012, its slowest pace for 13 years.
Inflation hit a 10-month high of 3.2 percent in February, up from January's 2.0 percent.
The Flash index is published about one week before the final PMI data.
HSBC's China Manufacturing PMI is due for release on 1 April.
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