China’s economy expanded by an impressive-looking 8.1% in 2021, according to official data. This came after growth of just 2.2% in 2020 amid the onset of COVID-19, and an average of 7.7% in the previous decade. Headlines can be deceiving, however. Strong growth last year was largely a result of highly favourable statistical carry-over effects – quarterly annualised growth averaged just 4% in 2021. The year-on-year pace of growth also slowed sharply in the second half of the year. Fathom’s China Momentum Indicator, which is our estimate of China’s true underlying growth rate, has also slowed sharply. Unless there is a material change in policy, away from Xi’s ‘jam today’ approach, we believe China is headed for Japanification…

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