Cause to cheer, cause to jeer China stock bounce

With a few benchmarks for Chinese stocks up 20% from January lows, a debate is raging between the bulls and bears.

The bulls are betting that Beijing’s rescue efforts so far have been enough to establish a market bottom — and that buying opportunities abound. The bears see more of a “dead cat bounce” after a US$7 trillion rout and continued signs China’s economic cracks are deepening.

Who’s right? That depends on what President Xi Jinping and Premier Li Qiang do next.

To be sure, the surge in share prices – including for the Hang Seng Tech Index – suggests investors have moved past the panic phase and are now digesting Beijing’s apparent game plan.

That involves highly targeted rather than broad-based stimulus and a greater emphasis on longer-term reforms to increase the role of high-tech and other high-value-added sectors to raise China’s broad economic game.

But this tentative rally also means Xi and Li are on the clock with global investors as never before.

To sustain the new buying, Communist Party leaders need to accelerate efforts to end the property crisis, stabilize local government finances and strengthen China’s capital markets.

This month’s National People’s Congress and “Two Sessions” meetings made for an uncomfortable split-screen for Xi’s team.

On one screen, Beijing took a big swing for the future with plans to unleash “new productive forces” to create a more stable and productive economy.

On the other were reminders that past policy missteps are catching up with the economy, seen in frantic efforts to prevent yet another huge property developer — China Vanke — from going bust.

Moves since January to reassure global investors appear to be gaining certain traction. These include the People’s Bank of China