In recent years, though, it sometimes seems the country's admired economic technocrats have been replaced by a jazz improvisation group, composing policy on the fly. On Wednesday, China's latest growth rate came in at 7 percent, better than forecast, but there's no denying it has decelerated markedly from the double-digit average seen from 1980 to 2012. And it remains below the increase in debt.
Nor has this been a stellar year for President Xi Jinping's economic team. First the government urged people to buy stocks, helping to inflate a bubble that exploded in mid-June, wiping out almost $4 trillion in market value. Then, with the subtlety of a chain-saw, the government intervened in the market with a barrage of measures to boost prices, leaving valuations untethered from economic realities on the ground.
Years of politically driven investment with diminishing returns, meanwhile, has led to a $28 trillion debt overhang, according to McKinsey & Co., and excess industrial capacity. In April, Shenzhen-based Kaisa Group Holdings, became the first property developer ever to default on dollar-denominated debt.
"China's political system was a great facilitator of the first wave of economic reforms post-1978," said David Shambaugh, director of George Washington University's China Policy Program and a veteran China watcher. "Now and into the future it is the greatest single impediment to further decades of reform and growth."
The array of challenges faced by Xi and his coterie would with little doubt equally perplex policymakers in Washington, London and Berlin. It's not the first country to let a roaring stock market run off the rails or ignore the risks of an expanding credit bubble, as U.S. and Japanese experiences can attest. Nor do the recent stumbles negate the rise of what's now the world's second-biggest economy.
Yet it's one thing to run a developing economy that relies on state-directed lending, cheap labor and plentiful foreign investment, as Chinese leaders did during the 1980s and 1990s. It is quite another to simultaneously pull off modernizing a financial system, rebalancing a big economy toward more consumer-led growth and defusing debt bombs in the property market, companies and local governments. That's pretty much the task at hand in Beijing.
Some investors are starting to wonder if China's well- educated financial authorities have lost their grip on a complex, $10 trillion economy in the midst of big structural challenges, according to Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management.
"For the first time, you've got this sign that something is out of control," Sharma said. "Confidence-damage is going to last for a while." He also worries that a faltering China could push the world economy into a recession.
Underscoring the deterioration in sentiment, Chinese stocks slumped Wednesday even after the government reported bigger gains in gross domestic product and June production and investment figures than forecast.
This probably isn't where the hundreds of top Chinese Communist Party delegates who convened in a Soviet-era hotel in west Beijing in late 2013 anticipated they'd be at this point. At the time, the leadership decreed that markets were to play a "decisive role" in the economy.
The top-down command structure of the Chinese political leadership, with its centralized mechanisms of economic control and secrecy, worked swimmingly during the early phases of the nation's rise. It may be less of an advantage when it comes to managing a vast, multi-dimensional economy where problems in one sector can quickly shape-shift and create unintended consequences elsewhere.
While this isn't Mao's command-and-control China anymore, the government still plays an out-sized role in credit allocation and monetary policy. The four biggest state-owned banks control 39 percent of all lending.
The state's control proved a boon in the wake of the 2008 financial crisis, when Chinese leaders ordered the People's Bank of China to slash interest rates, encouraged lending to local governments and kept a lid on yuan appreciation. In 2009 and 2010, more than 17.5 trillion yuan ($2.8 trillion) rifled through the economy as the government embarked on an epic infrastructure binge and fed into a property market bubble.
As authorities then tried to rein in liquidity, market disruptions emerged, including a surge in interbank borrowing costs in mid-2013 to a record level that unsettled investors.
The next asset bubble, produced with cheer-leading from the state-controlled media: stocks. The Shanghai Composite Index surged in excess of 150 percent from July 2014 through June 12, even as the economy was weakening.
A thriving stock market allowed China's debt-burdened companies to announce at least $226 billion this year in initial and secondary offerings. Yet at the same time millions of unsophisticated and, in some cases illiterate, Chinese retail investors bet their savings on stocks as a revved-up market headed for a severe downturn.
When the bull market turned into a bear one, the flurry of measures unleashed to shore up stock prices then put a severe dent in Xi's pro-market agenda. Trading in more than 1,400 companies was suspended, large shareholders were told not to sell, brokerages were given financial support, new listings were shelved and investigations were set up to root out short sellers.
"They have been good at playing whack-a-mole and containing damage but I don't think that they have been in control in terms of the trajectory of the economy for the last several years," said Patrick Chovanec, chief strategist at New York-based Silvercrest Asset Management Group, which oversees $18 billion.
An even bigger test of confidence in China's leadership will be addressing an ever-growing reliance on debt to fund growth. Behind Wednesday's stronger-than-projected numbers was Tuesday's report of the biggest jump in credit since January -- the product of policy makers ramping up efforts to get more money flowing. Outstanding loans for companies and households stood at a record 207 percent of GDP at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.
"Because the debt burden will continue to rise for at least another four or five years, Beijing's credibility will be tested more than ever and it must be protected more than ever," said Michael Pettis, a finance professor at the Guanghua School of Management at Peking University.
China's reforms haven't halted -- interest rates are being freed up, a new trading link connects the Shanghai and Hong Kong stock exchanges, and there's a push to make the currency more international. And the meddling in stocks doesn't necessarily mean the government is pulling back, said Tim Summers, senior consulting fellow on Asia at Chatham House in Hong Kong.
"The reform program is basically about medium-term issues, over the years to 2020, whereas the stock-market intervention was a response to an immediate and potentially destabilizing risk," he said.
Not everyone is convinced.
"The bubble, and the instability it underscores, is a major setback on the road to capital market reform -- a linchpin of China's rebalancing strategy," said Stephen Roach, a senior fellow at Yale University and former non-executive chairman for Morgan Stanley in Asia.
--Contributors: Fox Hu in Hong Kong, Jun Luo in Shanghai, Ye Xie in New York and Gavin Serkin in London.
