China's and Hong Kong's economies are slowing down according to purchasing managers' indexes. Morgan Stanley predicts China's growth at 6% in H1 and 5.7% for 2023, but weakening demand led to a faster-than-expected contraction in May's factory activity. Despite this, the services sector is strengthening, with the Caixin/S&P Global services PMI increasing to 57.1 in May. Hong Kong's private sector PMI fell to 50.6, indicating slowed growth. Meanwhile, concerns are growing over municipal debt risks in China following repayment stresses in provinces such as Guizhou and Yunnan, although China's fiscal status remains overall sound, according to a finance ministry official.
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