Given China’s disappointing forays into consumption stimulus over the past few years, there can be little doubt that its recent strategic shift back toward infrastructure-driven growth is fully justified. All the talk among international commentators about overcapacity ignores the realities on the ground.
BEIJING—China’s first-quarter year-on-year GDP growth rate of 5% indicates that the sustained slowdown seen in the second half of 2025 has been reversed. In March, the producer price index rose by 0.5% year-on-year, ending 41 consecutive months in negative territory. Nonetheless, the fundamental problem of insufficient effective demand remains, which means that authorities are likely to continue proactive fiscal and monetary policies, while remaining vigilant against the effects of oil-price fluctuations and other external shocks.