In this setting, monetary policy needs to be even more forward looking than usual, seeing beyond the shutdown to its potential implications for the subsequent recovery. The loss of household wealth coupled with self-reinforcing weakness in business and consumer confidence could continue to weigh on aggregate demand after the restrictions are lifted. Some businesses will fail, and workers will not regain their old jobs.
The answer is that the undervaluation and export promotion strategy has been a highly successful growth strategy, not only for China but also for other countries. The policy works, spectacularly so in the case of China.