Government policies on real estate and financial markets, followed by drops in interest rates and a lowering of the bank reserve requirement ratio triggered huge spikes in the Ashare market, particularly in the five trading days before the weeklong National Day holidays which started on October 1. The stimulus package, with the central bank’s unprecedented release of 800 billion yuan (US$110.8b) in stock liquidity through new monetary tools, aims to improve economic fundamentals in the long run. Despite China’s complicated and multifaceted economic problems such as local government debt, maintaining the stability of both the stock and real estate markets are critical targets for policymakers. Economists agree that China’s economy has been affected by insufficient demand and reform is imperative to avoid a liquidity trap. Manufacturing alone will not improve people’s economic situations quickly and without market confidence, it will be hard to boost the economy, analysts said.
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