Diminishing Expectations

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I had the pleasure to make a few trips to China in recent months, and in many respects it was a joy to be back, visit old friends in government and academia, and enjoy the clear skies in Beijing and Shenzen, no doubt partially due to the astonishing increase in electric vehicles on the road. In between my first trip (may) and my last (July) the mood with respect to the economy noticeably changed, though. Whereas the first couple of months promised a vigorous recovery after the dismal performance of 2022, the recovery seems to be petering out. The causes and consequences of the slowdown were hotly debated among the people I saw, and in conferences and media in China. Clearly, not everybody agrees, either on the diagnosis, and especially on the remedies the government should put in place. This posting contains some of my reflections, and (anonymously) is based on the thoughts of many people I met. Apologies for the length, but there was a lot to digest! Thanks for reading Bert’s Newsletter! Subscribe for free to receive new posts and support my work.China has had a challenging exit from its zero-COVID policy. Whereas the first quarter of 2023 saw a sharp rebound of gross domestic product (GDP) growth (9% on an annualised basis), this fell to 3.2% in the second quarter—still respectable in the global context, but less than what many have expected. Though the government’s modest indicative target of “around 5%” is likely to be met, private forecasters have been downgrading their optimistic forecasts in recent months. The government is increasingly concerned with the consequence…