Hong Kong: After years of economic struggles, Hong Kong’s Hang Seng Index has surged over 18% in the past two weeks, marking its largest gain in nearly two decades. The rally followed a series of stimulus measures from China’s leadership aimed at reviving the economy. The sharp turnaround has been a relief for many, including Francis Lun, head of a small brokerage in Hong Kong. “Before the announcement, we were barely getting by,” Lun told CNN. “Now, the phone’s ringing again, and business is picking up.”

While the markets are responding positively, there is lingering uncertainty about whether this momentum will translate into broader economic recovery. China’s economy, which has been facing the dual threats of deflation and stagnant growth, is at risk of missing its 5% growth target for the year. Despite the recent surge in stock markets, economists caution that a sustained recovery will require more than just monetary policy interventions.

So far, Beijing has focused on reducing borrowing costs and adjusting mortgage rates to address the struggling property sector. However, experts argue that more robust fiscal measures, such as tax reforms or large-scale public spending, are needed to restore consumer confidence and stimulate demand. Nikko Asset Management economists have pointed out that low consumer confidence is the primary issue, and only stronger fiscal policies can reflate the economy and make the market rally sustainable.

A "Whatever It Takes" Moment for China?
Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, recently suggested that this could be China’s "whatever it takes" moment, referring to the need for significant action from Beijing to address the economic slowdown. The next key moment could come on Tuesday, when China’s National Development Reform Commission (NDRC) is expected to unveil new policies aimed at further stimulating the economy.

Economists are divided on the specifics of what Beijing should do, but there is consensus that the government is now acting more decisively than in the past. A rare joint press conference held on September 24 by the heads of three major financial institutions—the People’s Bank of China (PBOC), the National Financial Regulatory Administration (NFRA), and the China Securities Regulatory Commission (CSRC)—was seen as a signal of transparency and urgency. The officials announced several key measures, including a cut in a key interest rate, reductions in mortgage rates, and a lowering of down payment requirements for second-time homebuyers.

“This time feels different,” HSBC economists, led by Jing Liu, wrote in a recent note, calling the coordinated policy announcements “unusual” and signaling that more is yet to come. They predict that Beijing will soon announce a trillion-yuan ($142 billion) fiscal stimulus package, which could include spending on consumer goods and large infrastructure projects to boost demand.

Looming Fiscal Measures
According to reports, China is planning to issue special sovereign bonds worth about 2 trillion yuan ($284 billion) later this year as part of a broader fiscal stimulus package. The funds will likely go toward boosting subsidies for household purchases of larger appliances, upgrading business equipment, and supporting families with second or younger children through monthly allowances.

Some economists believe China can afford to be even more ambitious with its fiscal policies. Jia Kang, former director of a think tank linked to the Ministry of Finance, has suggested that Beijing could issue as much as 10 trillion yuan ($1.4 trillion) in long-term government bonds to finance large-scale infrastructure projects. This would echo China’s 2008 response to the global financial crisis, when the government launched a 4 trillion-yuan ($570 billion) stimulus package.

While some analysts see this as a potential game-changer, others urge caution. Barclays analysts believe that a 10 trillion-yuan fiscal package spread over two years could add a full percentage point to China’s GDP growth, but they emphasize that this is still speculative. Any effective stimulus must also address the underlying issues in China’s property market, including oversupply and a lack of consumer demand.

Property Market: The Root of Economic Woes
China’s property sector remains at the heart of the country’s economic troubles. The recent measures to lower mortgage rates and down payment requirements are aimed at stabilizing the sector, but experts warn that these are only short-term solutions. A more comprehensive approach is needed to address the sector’s structural problems, which include a glut of unsold properties and high levels of debt among real estate developers.

BNP Paribas Asset Management’s Chi Lo remarked that while the policy shift has led to a stock market rally, sustained economic recovery will require much more. “The real test will be whether the government can address the property sector’s deep-rooted issues,” he said.

As China’s leadership continues to unveil new policies, the question remains: Will these measures be enough to solve the country’s economic challenges, or will further action be necessary to ensure a lasting recovery?