China's New Normal of Low Growth... June Economic Indicators Also Weak

China's low-growth trend is solidifying as the 'new normal.' Due to the global economic downturn and sluggish domestic demand, key economic indicators last month also recorded figures below expectations.

On the 5th, Chinese economic media Caixin released the June Caixin Services Purchasing Managers' Index (PMI), which stood at 53.9, marking the lowest point in five months. The Caixin Services PMI remained above the baseline (50), continuing an expansion phase for six consecutive months, but it fell short of both the previous month's figure (57.1) and market expectations (56.2).

[Image source=EPA Yonhap News]

The PMI is an indicator that gauges economic trends through surveys on new orders, shipments, production, inventories, and employment. A reading above 50 indicates expansion, while below 50 signals contraction. The Caixin Composite PMI, which combines manufacturing and services, dropped 3.1 points from the previous month to 52.5 in June. The market views this as a reflection of weaker-than-expected responses during major consumption periods such as the Dragon Boat Festival holiday and the 6.18 shopping festival.

Manufacturing indicators are also weak. China's official manufacturing PMI, released by the National Bureau of Statistics, recorded 49 last month, remaining below the baseline for three consecutive months. Although slightly improved from the previous month (48.8), it still has not escaped the contraction phase. The Caixin manufacturing PMI also stood at 50.5 in the same month.

Nomura Securities analysts explained, "Recovery in the tourism and mobility sectors has lost momentum, and the average price of construction materials such as cement has fallen to an all-time low, causing the construction sector to continue slowing down."

There is also an assessment that this trend is becoming the 'new normal' for the Chinese economy. Julian Evans-Pritchard, Chief China Economist at Capital Economics, said, "The services sector experienced a brief recovery due to the reopening effect, but it now appears to have settled into the post-pandemic new normal of slower growth."

Jiang Ziwei, Chief Economist at Pinpoint Asset Management, stated, "With the global economy slowing down, external demand will face more pressure in the coming months," adding, "It is uncertain whether the government will introduce aggressive stimulus measures given the weak economic indicators."

Earlier, Premier Li Qiang expressed confidence that China's economic growth in the second quarter would be faster than in the first quarter, but this is largely due to the base effect rather than real growth. Chief Economist Julian Evans-Pritchard noted, "The positive growth in the services sector seen at the beginning of the year has fallen below pre-pandemic levels," and predicted, "If more proactive policy support is introduced, there may be some recovery in the remaining period, but it will be gradual."

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