Examples abound. When authorities last year lifted a ceiling on bank deposits to allow freer pricing, they followed up with guidance to banks not to use too much of their new-found freedom, showing the tension between reform and control. In Shanghai, a much championed free-trade zone has largely disappointed.


Policy Blunders


"It makes one wonder whether Chinese policy makers are students of Goethe -- ‘By seeking and blundering we learn,’" said Barry Eichengreen, a University of California-Berkeley professor.

In an effort to restore confidence among investors and strengthen oversight, China’s cabinet has created a new department to coordinate financial and economic affairs, under the General Office of the State Council, according to a person familiar with the matter. The No. 4 secretary office is tasked with coordinating between financial and economic regulators and gathering data from local offices.


Hand of State


How effective that move will be remains to be seen. Since taking power in late 2012, President Xi has consolidated power and dominates economic policymaking, a role traditionally left to the premier. Xi promised in 2013 to let markets have a decisive role, but analysts have been disappointed by the pace of change.

The Communist Party is unlikely to relinquish its control over economic matters any time soon, said Chen Zhiwu, who sits on the International Advisory Board of the China Securities Regulatory Commission (CSRC), the nation’s stock market regulator. "It’s that misunderstanding that goes to the heart of China’s dilemma," the Yale University academic said.

"In my lifetime, an American-style free market will never become a reality in China," said Chen, who advised the government on establishing the China Investment Corporation, one of the nation’s sovereign wealth funds. "China is much more for a very active government hand. That cultural heritage will not be easy to change."


Debt Pile


There’s also been no real progress in chipping away at the debt burden, supercharged by spending on infrastructure and housing, that delivered average economic growth of 10 percent over the past 30 years. Government, corporate, and household borrowing totaled $28 trillion as of mid-2014, or about 282 percent of the country’s GDP at the time, according to McKinsey & Co.