Doubts about China's economic leadership sap confidence

The skepticism is rising just as China is pursuing one of the most daunting transitions in modern economic history — from overheated growth, driven by exports and often-wasteful investment, toward slower and sturdier growth fueled by spending from an emerging middle class.

To try to cushion the pain from a slower economy, the government deployed state-run media to promote stocks for inexperienced individual investors.

The hope was that Chinese companies could issue shares into a rising market and use the proceeds to finance growth and shrink their heavy debt levels.

The Shanghai Composite Index rocketed 150 percent in the year through mid-June, propelled in part by individuals who poured money in, often on borrowed funds, confident that their government wouldn't steer them wrong.

"The bubble pops, and they intervene and it doesn't work," says Derek Scissors, resident scholar at the conservative American Enterprise Institute.

[...] the United States and the International Monetary Fund had long urged China to let market forces play a bigger role in the yuan's exchange rate.

(A lower-valued yuan gives Chinese goods a competitive edge overseas.) And Beijing has since sent confusing signals, sometimes intervening to keep the yuan from falling too fast.

Some analysts have sought alternative ways to gauge China's economic performance — electricity consumption and freight shipments, for example.

After the global financial crisis in 2008, for instance, they enacted a stimulus program — spending on roads and other infrastructure and ordering state-owned banks to lend freely.