The rapid unwinding of China’s zero-Covid regime has raised an interesting question for economists and investors: what happens if the country’s economic growth remains sluggish even after all pandemic control measures are withdrawn? After all, three years of harsh restrictions have inflicted heavy damage on the world’s second-biggest economy. Local governments, including those of the richest Chinese cities, are running out of money. Chinese consumers are unlikely to raise spending with income reduced. And confidence in the private sector and among foreign investors is lacking. China’s top leadership seems to have noticed. The new 24-member Politburo has pledged to “forcefully boost market confidence” in 2023. The central economic work conference later this month is likely to elaborate on plans to support growth next year and beyond, in an assurance to investors that Beijing still sees economic development as the foundation of its lofty political aspirations. China has started to send out strong pro-growth messages in the last couple of days after ditching its “dynamic zero” Covid-19 policy. There is a near-consensus within the Chinese government that a page has been turned, and the days of massive lockdowns are over, despite ongoing infections. The country, for instance, abolished on Tuesday its official app used for tracking the travel history of citizens, a sign of the government’s determination to go back to normal life even with the approach of the Lunar New Year travel rush – an event known as the world’s largest annual human migration, with hundreds of millions of Chinese travellers on the move. After Beijing made it clear that the priority for 2023 will be economic growth, local government officials have started to act like they did in the early 1990s. Local official newspapers in recent days have been filled with reports about provincial leaders meeting potential investors and promoting investment projects. An investment promotion delegation from the island province of Hainan, led by one of its vice-governors, recently visited Hong Kong. Beijing has even shown willingness to compromise on issues that it had stood firm on for years. The readout from China’s Politburo meeting last week omitted the key phrase “houses are for living, not for speculation”, suggesting that Chinese leaders are ready to further ease restrictions in the housing market. These policies are set to make China a bright spot in an otherwise gloomy global economy next year. There is in general a clear sense of urgency among Chinese leaders that they must do something to help the economy. It marks a contrast from a few years ago, when China was quite certain that its growth was unstoppable with the mantra of “the East is on the rise and the West is in decline”. But while Beijing has changed its mind, it doesn’t mean it can get away with not fixing structural problems in the Chinese economy; to the contrary, China’s zero-Covid measures have exacerbated them. Young Chinese people are becoming more reluctant to get married or have kids, while China’s vast population of low- and middle-income earners in the private sector have suffered bigger losses than those employed by the state, making it harder for the country to implement its “dual circulation” strategy. The government’s current remedy, to allow government and corporate debts to expand further, is just kicking the can down the road or, in its own words, “quenching thirst by drinking poison”. For sure, it can use massive fiscal spending and easy monetary policy to create a short-lived, policy-driven boom, but that cannot be sustained. Beijing’s policy swings from one extreme to another, ranging in areas from pandemic control to video gaming, have already frightened some investors, and some of the damage may be permanent: if certain foreign investors have already made the decision to cut exposure to China, it would be hard to regain their trust. Still, it is ultimately a good move for Beijing to shift its attention to the economy instead of focusing on the unwinnable battle against Omicron.