Economics: The constraints on China’s recovery

The hit to GDP from the recent lockdowns was less severe than in 2020

The contraction in GDP from the recent lockdowns was less severe than the slump from the initial Covid outbreak in Q1 2020. China’s economic recovery has begun, but three interrelated problems are likely to constrain the rebound.


The drag on growth could prove longer lasting 

The hit to private sector sentiment may have been worse than in 2020. The composition of unemployment suggests job losses may be more persistent. The property market’s double dip is causing new financial stress. Plus, export growth may slow sharply. 


Monetary-fiscal coordination may be needed for a full recovery 

Monetary easing has so far been ineffective. Fiscal support has been more important, but current policies will lead to severe tightening in the coming months. This suggests monetary-fiscal coordination may be the key to unlocking a self-reinforcing recovery.


Economics: The constraints on China’s recovery