China’s Economic Caution Is a Problem For Us All

China’s central bank protests too much. Beijing is wary of overdoing its efforts to shore up the troubled financial system and faltering economy, but continues to be pushed into rolling out new measures. Fresh steps are announced almost daily, though many are modest in scope. China faces at least another year of lackluster expansion, and global growth will endure significant challenges if the tyranny of incrementalism continues. There are few grounds for optimism.

The latest initiatives from the People’s Bank of China point to deepening concerns. Investors were surprised by cuts in official interest rates last week, though the size of the adjustment was meagre by world standards. State firms are being pushed to extend more credit and $29.3 billion in special loans will be offered to ensure property projects are delivered to buyers. The yuan is near its weakest in two years and down more than 5% against the dollar over the last 12 months; officials likely see some depreciation as a way to bolster exports, provided the currency’s retreat isn’t dramatic. On Wednesday, China’s cabinet outlined a 19-point package to keep the economy afloat. That sounds impressive, though the details were less encouraging. The commitment of a further 1 trillion yuan ($146 billion) in funding, largely focused on infrastructure, won’t pack an enormous punch.