Abstract

This study conducts a comparative analysis and a systematic literature review (SLR) to evaluate the Chinese government’s stock market stimulus policies during 2008, 2015, and the recent measures in 2024. Historical examination reveals that the government relied on monetary and real estate policies to boost market performance in both 2008 and 2015. Similarly, in 2024, the government has implemented comparable strategies, triggering a notable rise in stock market indices. However, these short-term interventions carry significant risks. By fostering a market environment potentially disconnected from fundamental economic values, the likelihood of a speculative bubble increases, raising concerns about a subsequent market collapse. This study delves into the underlying motivations for the government’s recent actions, suggesting that the stimulus is likely aimed at providing financial relief to underperforming state-owned enterprises (SOEs). Such measures intertwine the stock market with the bond market and banking sector, heightening the risk of systemic financial instability. Additionally, investor scepticism about China’s commitment to market-oriented reforms could further erode confidence in the economy. Our findings indicate that the current stimulus efforts are unsustainable and may exacerbate systemic risks. Rather than relying on monetary easing or propping up poorly managed SOEs, we recommend prioritizing the development of a robust, well-regulated capital market. By fostering a transparent legal framework and stable economic expectations, China can create a healthier investment environment that ensures long-term growth and stability.