There was a moment of grace on Tuesday for investors, market analysts, and finance’s top brass when Beijing announced measures to try to reinvigorate China’s croaking economy. Pan Gongsheng, a governor of the People’s Bank of China, the country’s central bank, announced that 800 billion yuan, or about $114 billion, would be injected into the stock market. Policymakers also said they were discussing raising a fund designed to stabilize stocks and announced rules allowing Chinese banks to keep less money in reserve, freeing up 1 trillion yuan to go out asloans. They also lowered the People’s Bank of China’s medium-term lending rate and key interest rates for banks and customers. Homebuyers can also now put less money down on their purchases — an attempt to breathe life into China’s moribund property market.

Wall Street’s prompt reaction was the jubilee next door. From the pandemic, the Chinese leader, Xi Jinping, has not done much to avoid bleeding in the true real estate market of the country or so that consumers are in difficulties from China to start spending effective again. Compound Shanghai has lost a quarter of its value. American corporations in China are crushed. Foreign investors attract record amounts of the country. This week’s ads have sent Wall Street to a state of kidnapping, hoping that the Chinese Communist Party is now preparing, as in recent years, he was preparing to catch a falling knife. The Golden Dragon index, a collection of negotiated corporations in Nasdaq that make the maximum of their belongings in China, have been raised to 9% after the ads. The monetary parish bosses announced this as a transparent signal of Beijing that political resolution manufacturers were carried out to avoid China’s decline in a deflationary funk. There would be more mergers and acquisitions! The lowest costs can mean more investment capital activity! Beijing note “Bazooka” may be on the way!

But honey, they get their hopes up.

Xi’s Beijing lacks the will and the power to turn China’s economy around. At the heart of its problems is a lack of consumer demand and a property market going through a deep, slow-moving correction. Xi is ideologically opposed to jump-starting consumer spending with direct stimulus checks. No will. As for the power, Goldman Sachs estimated that returning China’s apartment inventory to 2018 levels would require 7.7 trillion yuan. China’s property market is so overbuilt and indebted that the trillions in stimulus needed to fix the problem — and make the local governments that financed it whole again — would make even a rapacious fundraiser like OpenAI CEO Sam Altman blush. The “stimulus” China’s policymakers are offering is a drop in a well, and they know that. Wall Street should too. But I guess they haven’t learned.

The measures the CCP announced are intended to make it easier for Chinese people to access capital and buy property, but access to debt is not the problem here. People in the country do not want to spend money because they are already sitting on large amounts of real-estate debt tied to declining properties. Seventy percent of Chinese household wealth is invested in property, which is a problem since analysts at Société Genéralé found that housing prices have fallen by as much as 30% in Tier 1 cities since their 2021 peak. Land purchases helped fund local governments so they could spend on schools, hospitals, and other social services — now that financing mechanism is out of whack. Sinking prices in these sectors, or what economists call deflation, has spread to the wider economy. The latest consumer price inflation report showed that prices rose by just 0.3% in August compared to the year before, the lowest price growth in three years, prompting concerns that deflation will take hold, spreading to wages and killing jobs.

Given that context, many Chinese people are not eager to spend. Consumers are trading down to cheaper products, and second-quarter retail sales grew by only 2.7% from the previous year. In a recent note to clients, the business surveyor China Beige Book said that business borrowing had barely budged since all-time lows in 2021, during the depths of the pandemic. Bottom line: It doesn’t matter how cheap and easy it is to access loans if no one wants to take one out.

“These mostly supply-side measures would certainly be helpful if the problem in China was that production was struggling to keep up with growth in demand,” Michael Pettis, a professor of finance at Peking University and a Carnegie Endowment fellow, said in a recent post on X. “But with weak demand as the main constraint, these measures are more likely to boost the trade surplus than GDP growth.”

The maximum direct way to stimulate the call in a deflationary economy is to send checks to households. But again, Xi doesn’t need to do that. The Chinese president is a follower of Austrian economist Friedrich Hayek, who believes that direct stimulus measures distorting markets and leads to uncontrollable inflation. This is contrary to what economists would present for the situation in China, however, those who criticize Xi’s way of doing things tend to disappear.

It is clear that the recent measures taken through Beijing will not solve China’s main economic challenges. And Wall Street’s enthusiasm is missing another key challenge: The measures aren’t even that important. Call it a bazooka, bombing or something else, but this recovery plan is minimal compared to what we have seen from the CCP in the past. In 2009, the government spent 7. 6 billion yuan to save the economy during the global economic crisis. In 2012, it allocated $157 billion to infrastructure projects. In 2015, it pumped more than $100 billion into struggling regional banks and devalued its currency to boost its declining exports. The PCC has demonstrated that it was in a position to take draconian measures to stabilize the economy. The value of this stock, however, is a large debt accumulated by the economic system, owned in particular by real estate companies, public companies and local governments. In the past, economic flexibility has calmed turbulence in the economic system, but expansion has never been so slow and debt has never been so high. The challenge does not correspond to the value here.

The Chinese Communist Party has a bubble in its hands and does not need to blow much more or see it burst spectacularly. Then there is Xi, who appears disinterested in restructuring the real estate market. It needs government investment to focus on generating frontier generation and boosting exports to grow the economy from its structural debt problems. But those new sources of profits have not yet materialized for China, and building them will take time and industrial conflicts, mainly with the United States and the European Union. Consider the easing measures we see as a moment for markets to catch their breath: a respite from what has been a steady stream of bad economic news. But all it is is a respite.

Linette López is a senior correspondent of Business Insider.

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