Over the past year, the Chinese economy has witnessed a decline. As containment measures were enforced to contain Covid-19, industry and consumer sentiment significantly slowed down. Despite widespread discontent regarding the restrictive regulations imposed by the government, it is now actively attempting to bolster economic development, with many of those restrictions being abolished or eased.
China Is Taking Steps to Rejuvenate the Economy
Nonetheless, Chinese policymakers have surprised the world by reversing the Covid measures and refocused policies on promoting economic growth. Almost all Covid restrictions have been lifted since November. Without mandatory quarantine and excessive testing regulations, the population could finally lead a normal life as before.
The recovery plan does not only affect the Covid measures. The government has promised additional support to increase jobs and incomes, boost domestic demand, and rejuvenate the Chinese economy. The government has scrapped regulations that have previously restricted tech giants, real estate developers, and the online education space.
Chinese Economy May Experience a Very Fast Recovery in 2023
Investors from all corners of the world welcomed the new general conditions, and as a result, The MSCI® China Index has made an impressive resurgence since November. Moving into Q2 2023, consumer behavior is anticipated to recover much faster (Factor Investing Research, Vescore), mainly in sectors such as retail and leisure due to built-up COVID immunity. Further, fiscal and monetary policies should make it easier for the Chinese economy to return to its growth trajectory efficiently. Unlike many industrialized countries, China’s inflation rate remains below 3%, which means that the central bank can reduce interest rates even further if need be.