The COVID–19 Pandemic and China’s Economic Slowdown

China Leadership Monitor, Winter 2022 Issue 74

11 Pages Posted: 19 Dec 2022

See all articles by Alicia García-Herrero

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

Date Written: December 1, 2022


The Chinese economy has been undergoing a structural slowdown during the past decade, due to aging, decelerating productivity, and lower returns on assets. The COVID-19 pandemic, coupled with China’s dynamic Zero-COVID policies, have worsened that trend, together with two other important factors, namely the demise of China’s real estate sector as well as the much more difficult external environment stemming from growing U.S.-China strategic rivalry and the war in Ukraine. China’s COVID experience started well but it is ending poorly. With much better economic performance in 2020 compared to the rest of the world, China managed to attract large amounts of capital while keeping its borders closed. However, doubling down on the Zero-COVID strategy with a much more contagious virus, while the rest of the world was opening, changed China’s fortunes for the worse. In fact, China is bound to grow barely half of what the government promised for 2022 (5.5 percent). Moving forward, as the Chinese government starts to show some signs of opening-up, the question remains whether a strong recovery should be expected. The answer is “no.” The factors behind China’s structural deceleration are still intact. In addition, COVID related scarring effects are bound to hurt the Chinese economy in terms of human capital and innovation. Finally, the 20th Party Congress has made it crystal clear that the role of the state – and the party – in the economy is bound to increase. All in all, even if the COVID restrictions are lifted, China might see a temporary recovery but the structural deceleration will still lead to growth at around 2 percent by 2030. This implies that any convergence with the U.S. economy will not continue for long.

Suggested Citation

Garcia-Herrero, Alicia, The COVID–19 Pandemic and China’s Economic Slowdown (December 1, 2022). China Leadership Monitor, Winter 2022 Issue 74, Available at SSRN:

Alicia Garcia-Herrero (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )


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