Last month, China engaged in its largest injection of monetary stimulus since the COVID-19 pandemic.  The government also indicated that fiscal stimulus is on its way. All-powerful Chinese Communist Party Chairman Xi Jinping wants to revive China’s moribund economy. China says its economy is growing at a rate in excess of 5%, but that does not seem plausible in the context of weak manufacturing data, slow household consumption, and a banking system that is broken. 

Stimulus measures are unlikely to reignite the Chinese economy. The government is not addressing its fundamental economic problems: diverting capital from the more productive private sector to the capital-destroying state sector, a focus on national security over economic growth, recapitalizing its banking system, a residential housing market that is in deep depression, and a household sector that is unwilling to spend because there is no national safety net for health or pensions. The Chinese stock market has flatlined over the last 15 years. By contrast, the U.S. S&P 500 is up almost 300% over the comparable period.