In yet another crushing blow to investors around the world, economists have dashed what some saw as the last remaining hope for a “miracle cure” to the global financial meltdown: China is not going to save the world.

As the financial crisis has spiralled, some have treated the relative silence of Beijing as a tantalising sign: China has vast foreign reserves, a huge sovereign wealth fund and has previously demonstrated its willingness to invest heavily in Wall Street. Many have been holding their breath for a dramatic move by Beijing to step in and calm nerves where Washington has failed.

But Andy Rothman, CLSA’s chief China economist, told clients in a note yesterday: “There is simply no way that the Chinese Communist Party can restore confidence in American and European credit markets and there is no step that Beijing policy-makers can take to solve the liquidity problem in western banking systems.”

The grim conclusion, made by one of the most respected China analysts in response to repeated “can China save the world?” questions from investors, also dispels the myth that dwindling consumption in the US and Europe will be offset by increased spending by China’s middle class.

For China to save the world with consumption would take a more extreme shift of behaviour than seems possible. And China’s famous exports, said Mr Rothman, will not be the driver many expect. Despite its well-established image as an unstoppable engine of export growth, China’s economy is predominantly driven by domestic consumption and investment: last year, exports accounted for only 16 per cent of nominal GDP growth.

Chinese households are steadily spending more, said Mr Rothman, but are doing so from a low base and will take many years to reach the levels seen in the United States. The only circumstances under which Chinese consumers could provide a short-term fix for slumping global consumption is if households were suddenly persuaded to borrow recklessly – what Mr Rothman described as a foolish leap into Western lending practices.

“Short of resorting to American-style ‘no documentation’ and ‘no downpayment’ lending, it is difficult to see how Beijing could turn its citizens into the world’s consumer of last resort. China, and the world, are much better off if Beijing continues on its cautious path towards promoting private consumption, rather than jump late on to the ‘liar loan’ bandwagon,” he said.

One main focus of the “China can save the world” optimism has been the high levels – around 16 per cent - of disposable income that Chinese households currently save. If that rate were lowered only slightly, some argue, the overall effect on consumption would be dramatic.

But others believe that the high savings rate in China represents a decision by households to effectively tax themselves in the absence of a viable social safety net. The money is saved against future costs of education, health care and retirement – moves by Beijing for the state to fully fund these things will take years, and it could be many more before the average Chinese sufficiently trusts whatever system is put in place to reduce savings levels.

Despite the downbeat theme of Mr Rothman’s report, he says that China might at least be able to put a floor under the rate of global economic decline. A key Communist Party meeting begins today and decisions are expected to focus on long-term structural reforms that may eventually restore the confidence of China’s domestic stock market, which has fallen heavily this year.

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