Despite stronger August headline data, there are more signs that China’s post-COVID recovery is moderating rather than consolidating or accelerating. This is because policy support for the economy has been inefficient, inadequate, and imbalanced—targeting enterprises rather than China’s consumers. Policy-makers have been too cautious and are now firmly behind the curve in combating deflationary pressures, while financial restrictions on property developers threaten to slow construction activity in the near term. More monetary easing and fiscal stimulus will be necessary in short order.
