Chapter 5: The Sword Drawn from Its Sheath

Absolutely brilliant! The Minister of Finance held a press conference without disclosing specific figures on the scale of economic stimulus, simply stating that the scale would be substantial, leaving the entire market to imagine wildly.

One must admit, the Minister and officials from the financial sector have become increasingly adept at managing market expectations. This is a lesson hard-earned. After years of financial and trade battles with the United States, learning through conflict, China's government departments have matured. Even the former U.S. president could govern through Twitter, manipulating global financial markets for personal gain. We cannot afford to suffer heavy losses and repeatedly fall into the same traps; we must progress.

Over the weekend, the market’s response to the Minister’s press conference was overwhelmingly positive. The exact scale and numbers mattered little. What mattered was the shift in China’s fiscal policy from contraction to expansion, from loose money to loose credit, and the transfer of leverage from residents and local governments to the central government. This is the correct broad direction. Only by swiftly repairing the balance sheets of the nation, government, and residents can debt ratios and bad debts be effectively reduced. In China, assets are mainly land, housing prices, or the stock market. Since the policy of “housing is for living, not speculation” can only maintain stability, the only option left is to boost stock prices. But a bull market does not form overnight; this is a slow bull marathon that could last decades, requiring at least a generation—and that generation is the post-2000 youth.

Only through the central government expanding its deficit for transfer payments, ensuring local governments can operate normally, can we prevent local governments from disrupting the business environment by failing to pay wages. Only by the central government leveraging itself to assume the implicit debts of local governments can local governments be freed to undertake new investments and industrial planning. Frankly, over the past 40 years of China’s economic development, local government investment has been the biggest driver. Without their investment enthusiasm, relying on investment to stimulate the economy is very difficult. As for relying on consumption to drive growth, that’s a chicken-and-egg problem. Investment comes first, consumption follows. Without local government investment pushing forward, there can be no consumer spending to sustain the economy. The one who tied the bell must untie it. The primary issue now is restoring local governments’ ability to drive investment—allowing them to go forth unburdened is the key breakthrough for resolving all current economic difficulties.

If the Minister’s asset-expansion fiscal policy is genuinely implemented, considering the approval process and fund allocation pace, it is likely that by mid-next year, the entire real economy will gradually emerge from the bottom. And that, indeed, is the true economic foundation for a sustained stock market bull run.

As for whether local governments will recklessly invest once they have funds again, that is another matter. We must take one step at a time; first solve the pressing issue of local governments lacking funds to repay debts. Survival first, then prosperity—that is common sense.

This weekend, domestic discourse was dominated by mainstream, reputable financial institutions, all expressing cautious optimism with professional tone. Meanwhile, those flamboyant influencers advocating for a 10,000-point bull market reportedly faced street confrontations from the post-2000 generation. The internet overflowed with humorous self-mocking stories of post-2000 youths caught in stock traps, making these kids seem utterly endearing.

It appears the wild swings of the A-share market have temporarily paused, with the next phase being a narrow range of volatility. However, individual stocks will remain highly volatile, primarily to purge leveraged positions. Leveraged positions, like housing prices, must be cleared if prices don’t rise, as speculative investors will cut losses due to high interest costs. It’s an inevitable price for human greed. Until leveraged positions are cleared, the stock market cannot find its bottom.

Foreign media’s usual tactic of hyping then disparaging China’s economic announcements has failed against the Minister’s approach, seemingly surprised by the rapid advancement of China’s government departments in adapting to financial warfare. After a brief silence born of exhaustion, Western media coined a new term: “Cutting leeks.” Since this financial war seems to have reached a temporary stalemate, both sides are gathering strength for the next move—a deadly dance of encirclement and counter-encirclement, where victory is uncertain until the very end.

Sure enough, following China’s sudden launch of the Dongfeng-31AG intercontinental ballistic missile on September 25, the Eastern Theater Command unexpectedly commenced the “United Sword-2024B” live-fire exercise in the early hours of October 14.

The missile fired on September 25 was interpreted by the market as “an arrow piercing the clouds, summoning thousands of troops,” marking the start of a consecutive surge in the A-share market. What will this new sword bring?

Global financial markets tensed once more, eyes glued to China’s opening bell. As expected, the Chinese stock market held steady, closing the day up 2% with nearly two trillion yuan in turnover, while surrounding markets edged down slightly, opting to watch from the sidelines.

At closing, the post-2000 youth’s witty remarks resurfaced: “If you can’t handle a 20% correction, how can you endure a 2% surge?”

The market finally calmed, and brokerage firms’ front doors were once again deserted. Such is the fate of brokers—relying on the heavens to prosper. Without constant preparation, how can one seize fleeting opportunities? Just two days ago, notices arrived demanding brokerage branches increase staff, rush to purchase equipment, and add account-opening clerks. Yet before these orders were processed, new account openings dried up! The brokerage bull market cycle is measured in hours; miss this window, and the next one may take years to arrive.

The phone rang—it was my nephew, Long Wuyang. Suddenly realizing he’s post-2000 born, my heart tightened. “Trouble’s brewing,” I thought.