China's PMI Falls Below 50 for 2 Consecutive Months... Stock Market Weakness Amid Economic Contraction

China's May PMI Records 48.8
Economic Recovery Slows Since Reopening
Hang Seng Index Posts Largest Drop in Asian Markets

China's official manufacturing Purchasing Managers' Index (PMI) for May fell below 50 for the second consecutive month, indicating a continued contraction phase in the economy. The Chinese stock market showed weakness amid growing concerns over the economic slowdown following the disappointing PMI data.

On the 31st, the National Bureau of Statistics of China announced that the manufacturing PMI for May stood at 48.8. This figure was 1 point below the market forecast of 49.8. The PMI is an economic outlook indicator surveyed from personnel in charge of human resources and purchasing at companies; a reading above 50 indicates economic expansion, while below 50 signals an economic contraction phase.

China's manufacturing PMI recorded its lowest level at 47.0 in December last year since the COVID-19 outbreak began in 2020. After Chinese authorities lifted the zero-COVID policy, the PMI rebounded to 50.1 in January and 52.6 in February. However, it slightly declined to 51.9 in March and has remained below 50 since April, hovering in the high 40s for two consecutive months.

Analysts suggest that consumption contraction, along with stagnation in manufacturing and the real estate market, have prevented the Chinese economy from showing a stronger recovery than expected even after the reopening. Major foreign media reported, "While the Chinese economy is recovering from the shock of city lockdowns caused by COVID-19, it is not showing a balanced recovery across factories, real estate, and export sectors."

Moreover, concerns about deflation are growing as both consumer prices (CPI) and producer prices (PPI) declined last month. In April, China's CPI rose by only 0.1% compared to the same month last year, falling short of the market forecast of 0.4%. The PPI also recorded its lowest level (-3.6%) since May 2020 (-3.7%), when the COVID-19 outbreak was at its peak.

Amid the bleak economic outlook, the Chinese stock market showed weakness. As of 2:47 PM, Hong Kong's Hang Seng Index stood at 18,052.63, down 2.92% from the previous trading day. This was the largest drop among Asian stock markets that day. The Hang Seng Index peaked at 22,688.90 on January 27 and has since declined, falling 20.2% over six months.

The Shanghai Composite Index recorded 3,191.18 at the same time, down 1.03% from the previous trading day.

This content was produced with the assistance of AI translation services.