For the first time since October 2012, HSBC's China PMI (Flash) printed at a sub-50 level (49.6) missing expectations (50.4) quite notably. This is the worst two-month drop in 17 months. This is problematic for the PBoC who are being arbitraged left, right, and center [5] and know that any stimulus will merely serve to exacerbate the problems they face (as we noted here that China simply cannot function with 'moderate' growth [6]). Every one of the main index's 11 sub-indices [7] is signaling 'problems' - from slower rates of output, slower new orders, employment dropping at a faster rate, stocks rising, and output prices falling. As HSBC notes, "The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds. A sequential slowdown is likely in the middle of 2Q, casting downside risk to China’s fragile growth recovery." Of course, none of this should come as any surprise to ZH readers - as we noted here, Chinese power consumption grew at its slowest rate since May 2009 [8].
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Charts: MarkitEconomics [7]