For some time, China has struggled with a sluggish economy and has been unable or unwilling to take decisive action to address the problem. With the Central Economic Working Group officially meeting this month, expectations about policy changes are increasing.

China has already announced it will "moderately" loosen monetary policy and take more "proactive" fiscal policy measures to support economic growth. However, even assuming the regulators do, will this matter?

Fiscal policy, which boosts or restricts the state's spending, is similar to monetary policy exercised by the central bank, which sets policies around the cost and availability of money for economic purposes. Economists turn to fiscal and monetary policy, seeking to boost or rein in activity and striving for the perfect balance to boost long-term growth. China's problem, however, stems from its engaging in activist fiscal and monetary policy for too long, building up pressures that cannot now be solved with the standard tools.

Fiscal and monetary policy starts from a similar epistemic point of origin that drives how we approach our estimates beforehand regarding the probability of success or failure in helping the economy. The common starting point of economists' dogmatic belief in stimulative fiscal and monetary policy flows from the idea that the economy, as a mechanistic operation, entered a period of sub-optimal operation and, by increasing government spending or reducing interest rates, can return to an optimal growth path. Put another way, economists believe that the volume and cost of money are the sole determinants of returning an economy to its optimal level and path.

However, even this framework relies on assumptions about the state of the world. Lowering interest rates and increasing government spending seek to boost investment based on the belief that an economy needs more investment to boost output.

The assumptions that the economy depends solely on the volume and price of money and the need to boost output are fundamentally wrong when applied to understanding what ails the Chinese economy.

According to the International Monetary Fund, the Chinese regime, at all levels of government, as well as local government financing vehicles, runs augmented fiscal deficits of more than 15 percent. Households and corporations are some of the most indebted in the world, and Chinese interest rates are some of the lowest in any major economy. The volume and price of money are not problems, nor is how they are traditionally deployed. China has far and away the highest rate of investment relative to the GDP of any major economy, at nearly 50 percent of GDP.

In fact, if anything, the problem is not that China needs more investment from loosened monetary and fiscal policy. For a country with approximately 18 percent of global GDP but more than 30 percent of global manufacturing, more investment will accomplish little more than putting more price pressure on an already deflationary producer market. With enormous oversupply, bridges to nowhere, and vast tracts of real estate development that will never be used, one must wonder what fiscal and monetary stimulus will be used to build.

So this presents China with a problem: Beijing is pulling a page out of textbook economics to lower interest rates and stimulate the economy when it slows, but the empirics here are anything but textbook. Put another way, it sure seems like China is taking common cold medicine when it looks like a cold, but the reality is that China suffers from a very different disease and needs very different medicine to solve its economic malaise.

The problem, however, becomes political if Beijing wants to reinvigorate growth. To do so, China could turn to various solutions, from working hard to stabilize the population -- though that is unlikely to happen for many reasons -- to reforming its economy to promote private enterprise and consumption. The problem with boosting investment and government spending is that the Chinese state-owned enterprises and bureaucrats created the problem in the first place, so it seems unlikely that reformers will correct it.

Whether China actually engages in fiscal and monetary stimulus rather than performative public statements remains an open question. However, even if Beijing actually engages in fiscal and monetary stimulus, it is the wrong prescription for what ails China.