Confidence in China’s post-COVID recovery has started to waver over the past week after the world’s second-largest economy reported disappointing figures for two of the major drivers of its economy: property and exports.

In response, China’s central bank is taking the opposite approach to western counterparts like the Bank of England by cutting its main interest rates to try to stimulate investment in its economy.

The Chinese government had hoped to recapture previous economic highs after ending its zero-COVID policy in December 2023. But there are some indications that the country may instead settle into the same moderate growth patterns over the medium to long term as other advanced economies.

When Chinese GDP growth bounced back to exceed market expectations in the first quarter of 2023, growing at 4.5% year on year, it was good news for China and for the global economy. The surge was partly led by retail sales shooting up by 10.6% in March as the lifting of COVID restrictions in December 2022 started to filter through to the domestic economy.

More importantly for the global economy, the end of China’s COVID restrictions unblocked supply chains and led to a hefty 14.8% rise in exports in March compared with the same month in 2022. Of course, it’s easy to hit high growth rates from a low base, but this was still a welcome sign that China could meet International Monetary Fund (IMF) expectations for GDP growth of 5.2% in 2023.

However, all was not what it seemed: China’s recovery is actually built on quite shaky foundations. There is weakness in domestic real estate investment and export expectations due to uncertain global demand and ongoing trade frictions with the US. So what can – and should – the Chinese government do about this?