The strategy of reviving China's stock market with the help of its own central bank PBoC has been quite successful. Onshore and offshore stock markets have been strong. The shock that the market has received last week reminds us of the bubble burst of the Great Depression in 2015. Seeing this, it seems that understanding the correct valuation of the stock market and making profits from it is still a distant dream. In fact, the fundamentals of the economy have weakened considerably in the years since the recession.

Looking at the current market situation, market experts believe that China will once again resort to fiscal measures and other supportive policies to deal with the situation. This time its fiscal package will be quite balanced and its scale will be uncertain. Due to this, investors can enjoy the boom in the market for some time, but a deep assessment will be needed to understand its serious internal impact.

On doing this assessment, we see three types of scenarios for the coming days. In view of this, investors need to be prepared for the weakest scenario after enjoying the initial period of the carnival. China's focus can be on a total of four things in the stimulus or package that China can give to increase its market in the next few months. In this too, initially it will focus on three sectors. First, it will increase fiscal transfers to local governments to deal with the shock. Secondly, to boost investment demand, China can speed up the construction of its mega cross-region projects. Third, China can consider increasing spending on social security schemes to help the poor financially. In the fourth and final measure, it can provide funds to those stalled residential projects which have already been booked, but their work is stuck due to lack of capital. However, the size and pace of this entire package can be very uncertain. Still, the size of the stimulus can be up to 3% of China's GDP. There are risks in taking good measures as well. Individual investors, especially those who have not yet suffered a shock as severe as the Great Depression, are eager to open accounts to take advantage of the rally in the market after the government measures without going into the depth of the situation. Given the current market momentum and the sentiments emerging on Chinese social media, the risk of a period like the Great Depression of 2015 coming back in the coming weeks seems to be increasing. While the stock market is not there yet, the fundamentals of the Chinese economy appear to be weakening amid three years of the coronavirus pandemic, nearly four years of the housing crisis, a second wave of high government debt and economic stress shocks, the bursting of the energy sector investment bubble, and still-rising geopolitical tensions. We maintain our 2025 GDP growth forecast at 4.0%. The Q4 forecast could be raised to 4.4% from 4.2% if there is heavy stock trading. The 2024 annual GDP forecast could be raised slightly to 4.6% from 4.5%. The good, the bad, and the baseline Under the best-case scenario, officials could closely monitor the emerging market bubble and take timely action to deal with the stock market frenzy by carefully managing the size and pace of fiscal stimulus. On the contrary, in the worst case scenario, after the stock market turmoil, there could be a recession like the 2015 recession.