(Adds analysis, quotes, stocks on the move)
SYDNEY Jan 23 Australian shares fell 1.1 percent on Thursday, extending early losses after China's factory sector contracted in January for the first time in six months as new orders declined.
The preliminary Markit/HSBC manufacturing survey pointed to a weak start for the Chinese economy in 2014 as policymakers seek to curb high debt levels to head off financial risks.
The S&P/ASX 200 index lost 56.8 points to 5,263.0, the lowest close since Jan. 16. The benchmark slipped 0.2 percent on Wednesday and has drifted lower in January.
New Zealand's benchmark NZX 50 index fell 0.8 percent to 4,911.1.
(Reporting by Maggie Lu Yueyang; Editing by Kim Coghill)