For those who believe China is in the midst of a property bubble, gripped by inflationary pressure, and struggling to appease irate savers, Tuesday’s 25 basis-point increase in policy interest rates looks pathetic. The new one-year lending rate of 6.06 per cent will not slow borrowing when gross domestic product growth and inflation are 9 and 5 per cent respectively. The new 3 per interest rate on one-year savings accounts will lure few renminbi out of speculation and into the banks.

The People’s Bank of China says much less than peers in more open societies, but it could argue that this increase is already the third of a series, with many more likely. In addition, the authorities are using other weapons to fight against monetary disorder: higher bank reserve requirements, tighter credit restrictions on the banking system, and the release of warehoused food (to reduce inflation in the most important consumer good).

However, if China really is heading towards a meltdown, the PBoC’s efforts will not do much to slow the dangerous momentum. Why would this institution be so weak? Perhaps it suffers from the same blind overconfidence that led pre-crisis central bankers elsewhere to ignore signs of danger. Perhaps the monetary authorities would like to be much tougher, but are being held back by politically stronger and economically illiterate bureaucrats who worry too much about growth and job creation and not enough about the damage caused by wasted investments and financial crashes.