China’s economy is now in a vastly different place, however. It was already gliding toward low single-digit growth before COVID-19 flared in early 2020 – that’s compared to the period after China’s ascension to the World Trade Organization in 2001, when gross domestic product surged by more than 10 per cent a year.
Is Beijing’s policy wedded to past trauma rather than the demands of the present?
LITTLE DOUBT BEIJING WILL DO MORE TO BOOST ECONOMY
Today, activity is sagging again after an initially strong rebound from a contraction early in the pandemic. There’s little doubt the state will do more.
The argument is about the scale, effectiveness – and communication. The difficulty articulating a clear path is compounded by the collar that zero-COVID has around business and social life.
It’s hard to make projections when you don’t know how many major cities are going to be shut down and when. That means tough times for forward guidance.
Authorities can’t just throw up their hands. The PBOC needs to try harder not to trip over itself. Before the latest rate reductions, the bank was striking an almost hawkish note. Governor Yi Gang is right to keep an eye on inflation, but it’s only a fraction of the level endured by other major economies.
“China is ratcheting up monetary stimulus in baby steps,” according to Eric Zhu of Bloomberg Economics. “With traditional tools failing to gain traction, a bigger policy shift will be needed to get growth back on track.”