China has been central to the story of globalisation over the past 30 years but now it is struggling. More than two years after Covid-19 cases were discovered in Wuhan, the world’s most populous country has yet to get on top of the virus. Draconian lockdowns have been imposed because China’s vaccines are less effective than those available in the west, and immunity levels are lower as well.
Growth is slowing and not just because of the tough restrictions insisted upon by President Xi Jinping. Flaws in China’s economic model coupled with a more hostile geopolitical climate mean the days of explosive expansion are over.
Unlike the US the UK or the euro area, China is not facing the inflationary problem that has prompted central banks to raise (or think about raising) interest rates. On the contrary, the People’s Bank of China is easing policy to stimulate credit growth. The authorities will try to spend and export their way out of trouble.