For a long time, there was a recurring stereotype about China's economy: If growth started to slow significantly, the argument went, prudent technocrats in Beijing could always prop it up with fiscal stimulus and keep the country's financial institutions afloat. Combined with optimistic official data about deficits, this argument sounded reassuring for a while.
Yet now reality is intervening harshly. China's public finances are in worse shape than is commonly understood. And as debt levels rise and the economy remains sluggish, the government's ability to boost growth looks increasingly precarious. Without reform, that will have some grim consequences.
