Don’t Count on China’s Central Bank to Fix the Economy

Zhou Xiaochuan, governor of the People's Bank of China, at a press conference at the National People's Congress in Beijing, China, March 12, 2015 Feng Li/Getty Images

Before the financial crisis, the world celebrated central bankers like Alan Greenspan like superstars.

That changed after the Western system almost crashed in 2008. Central bankers—all bankers really—are viewed with much more suspicion.

Not in China, though, where the central bank along with the central regime avoided a deep recession in 2008–2009 and kept the country growing officially at around 7 percent.

Now that more than a few problems have emerged in the Chinese miracle economy, more than a few people are looking to the central bank to fix a slowdown in growth, the burst real estate and stock market bubbles, and the growing inability of companies and local governments to pay back their debts.

So before the end of the year, the People’s Bank of China (PBOC) reassured investors and its own citizens that it will be able to handle the problem.

According to a monetary theorem called "impossible trinity," even China's superstar central bankers cannot have their cake and eat it too.