Why Stimulus Isn’t Working in China

China’s vaunted economic managers aren’t infallible — and they’re currently making a familiar mistake. They are trying to accomplish too many objectives simultaneously, many of which conflict with each other. Instead of engineering a recovery, the resulting confused policy mix is only feeding a growing feeling of uncertainty among Chinese markets, businesses and households. That will continue to depress growth in China — and the global economy — in 2019.

To be sure, Chinese leaders deserve some credit for their restraint. Despite credit growth that’s plumbing all-times lows, an economy growing at the slowest pace since 2009, and the intensifying trade war, they’ve resisted the kind of large-scale stimulus they launched in response to the global financial crisis. The central bank has increased liquidity injections and slashed reserve requirements at banks. The Ministry of Finance has cut taxes and stepped up fiscal support, with 2.4 trillion renminbi worth of local government bonds having been issued between July and September, double the amount in the previous quarter. But that’s pretty much the extent of their pump-priming.