Despite China’s record-breaking exports of $3.59 trillion and 7 percent export growth, the government fell short of its 5.5 percent GDP growth target for 2022. The economy, according to official statistics, grew by only 3 percent, one of the country’s worst performances in nearly half a century—mostly thanks to the uncertainty caused by repeated COVID-19 lockdowns.
After abruptly ditching zero-COVID policies late last year, Chinese leaders expressed their commitment to reviving the economy. But to do so, Chinese leaders must move beyond the familiar playbook that calls for boosting exports and government investment stimulus. Without first addressing the problems of household underconsumption and sluggish income growth, public pessimism about the future may offset the positive effects of export growth and government stimulus, holding back economic recovery.
Chinese household consumption was a solid growth driver over the past two decades, supporting nearly 40 percent of Chinese GDP. China’s rising consumer class was willing to spend more on aspirational goods, confident that their incomes would continue to grow. They were right: The Chinese economy maintained an average 9 percent annual GDP growth rate between 2000 and 2019. As a
