The strong growth rebound that was widely expected to follow the end of China’s “zero-COVID” policy has yet to materialize. This is both less surprising and easier to understand than many observers seem to think.
The end of COVID-19 lockdowns was supposed to unleash a powerful wave of pent-up demand. Instead, aggregate demand, which had been slowing before the pandemic, has returned to its previous trajectory. Though Chinese have been traveling, socializing and dining out more, consumer-spending growth by households has been limited. Fixed-asset investment has not recovered.
But this situation likely reflects temporary circumstances. In particular, when the new government took over earlier this year, it did not immediately introduce a comprehensive policy package aimed at bolstering the post-pandemic recovery.
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