The New York TimesThe New York Times

Why is China's economy stumbling?

By Paul Krugman

11 Aug 2023 · 3 min read

informed Summary

  1. China's economy is slowing. Its zero Covid policy proved untenable and led to deflation, much like Japan's economic slowdown in the 1990s.

Two years ago China was riding high. Decades of miraculous growth had transformed a desperately poor nation into an economic superpower, with a gross domestic product that by some measures was larger than America’s. China’s aggressive response to COVID was widely praised; its Belt and Road Initiative, a huge program of infrastructure investments around the world, was clearly a bid for global influence, maybe even supremacy.

But now China is stumbling. Its “zero COVID” policy of locking cities down at the first indication of an outbreak proved untenable, but abandoning the policy hasn’t produced the expected economic surge. In fact, China is now experiencing deflation, inspiring comparisons with Japan’s slowdown in the 1990s (although Japan has actually done much better than legend has it).

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