The writer is chief economist for the Asia-Pacific at Natixis and senior research fellow at the Bruegel Institute
The sudden and immediate reopening of the Chinese economy after three years of zero-Covid policies on December 8 last year was accompanied by a rapid positive turn in foreign investors’ sentiment, leading to a surge in portfolio flows, especially equities. This shift was based on the experience of other economies’ pent-up post-pandemic demand. Yet China seems to be following a different pattern.
While China’s services demand has been resilient, the sales of consumer durables have been disappointing, largely dragged down by cars. Fixed-asset investment is an important contributor to growth, but it grew only 4.7 per cent in April 2023, which is lower than the 2022 average. This is not only true of shrinking real estate investment because manufacturing investment is also growing more slowly than last year, when China had a countrywide lockdown.