Economy Watch: China View (November 2022)

COVID-19 and Related Controls Obstruct China’s Path to Recovery  

The past weeks have seen a series of policy measures aimed at addressing headwinds and improving confidence. These developments led to an immediate positive response in capital markets that fueled unrealistic optimism about the outlook. But China is not ready to shift away from ‘dynamic zero-COVID’, given low vaccination rates amongst the elderly and widespread fear of the virus among the ordinary people. The measures to support real estate financing are aimed at preventing a debt crisis, not at reheating the market. The global growth slowdown will continue affecting external demand. And while the meeting between Xi and Biden may have stopped further escalation of tensions, it did not stop the decoupling trend.