A New Economic Era for China Goes Off the Rails

HONG KONG — When President Xi Jinping of China convened a group of top officials to discuss the economy last month, the highly publicized meeting was seen as a moment of triumph.

A stock market plunge last summer, and a messy currency devaluation that followed, had faded from global view. In the relative calm, he seemed to usher in a new era of economic management, promising policy coordination at the highest levels to prevent another bout of turmoil.

Less than three weeks later, his plans have been derailed as China’s stock market and currency once again rattle investors around the world. The latest rout sets up a challenge for Mr. Xi, who has positioned himself as the master of the country’s economy.

At every turn, the president’s efforts to manage the economy, market and currency have been undercut by global headwinds and haphazard policy making, and initiatives this week have been particularly discordant.

He also cannot move forward on the bolder actions needed to head off a more serious economic slump, such as forcing hopelessly indebted state-owned enterprises to stop borrowing money and shut down. Otherwise, he risks further eroding short-term confidence and growth, which have depended heavily on this borrow-and-spend mentality, and mass layoffs could follow.

Mr. Xi’s options are also more limited than in the past. He and his aides engineered the elevation of the renminbi to the ranks of the world’s leading currencies, a status bestowed by the International Monetary Fund in November. But in doing so, he gave up some control, allowing market forces to play a bigger role.

In the last couple of years, China had begun allowing, even encouraging, companies and people to invest more of their wealth overseas. Doing so helped reduce deflationary pressures at home from chronic overinvestment and overcapacity, and increased China’s influence around the world.

But a trickle of money leaving China to buy houses and other overseas investments has become a flood this winter. The central bank has responded by trying for the last three weeks to slowly guide the currency down as a way to help bolster exports and also make overseas investments seem more expensive and less appealing