Twelve years ago, Mario Draghi, who had taken over as President of the European Central Bank for less than a year, demonstrated the power of language to the global financial markets with the phrase "whatever it takes." These three words expressed the ECB's determination to defend the European single currency, reversing the euro crisis. This moment later became known as the "Draghi moment."

Twelve years later, in discussing China's recent series of economic stimulus policies, two Wall Street heavyweights, Ray Dalio, founder of the world's largest hedge fund Bridgewater Associates, and Jeff deGraaf, co-founder and CEO of Renaissance Macro Research, both mentioned this phrase again—this is China's version of the "Draghi moment."

The theoretical support behind the "Draghi moment" may be the "announcement effect" of policy emphasized by Nobel laureate in Economics John Hicks: after the announcement of a policy, because people believe it will happen, it can immediately lead to a change in expectations.

Not all policies can have such a powerful positive "announcement effect." Gao Zhanjun, a distinguished senior researcher at the National Institute of Finance and Development (NIFD), summarizes the specific conditions required for the emergence of the "Draghi moment" into four aspects: First, deeply addressing the crux of the problem and providing targeted solutions; second, the policy logic is rigorous and reasonable, with strong acceptance and follow-up implementation; third, the timing is precise; and fourth, the credibility is high.

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If the essence of the "Draghi moment" is three words, then the "China moment" that shows the determination to boost the economy has seven characters—one package of incremental policies. However, unlike the slogan-like declaration of the "Draghi moment," behind the seven characters of the "China moment" are real money and step-by-step policy implementation.

The profound meaning behind the seven characters

October 8th, the first working day after the National Day holiday. At 10 a.m., a special press conference attracted the attention of China and abroad.

The news release unit is the National Development and Reform Commission. Attending the press conference are Zheng Shanjie, the director of the National Development and Reform Commission, and his deputies Liu Sushe, Zhao Chenxin, Li Chunlin, and Zheng Bei. Such a "one main and four deputy" press conference configuration is very rare.

In addition to the personnel configuration, the timing of the conference is also crucial. After all, the week before the National Day holiday, China's macroeconomic control policy made a milestone move, launching a "combination punch" to boost the economy, and at the same time, the signal of "one package of incremental policies" emerged—on September 26, the Central Political Bureau held a meeting to analyze and research the current economic situation and deploy the next economic work, mentioning the need to "introduce incremental policies with greater force"; three days later, on September 29, the State Council's executive meeting was held, mentioning the need to "study and deploy the implementation of a package of incremental policies."

At the National Development and Reform Commission's press conference on October 8th, the focus was on "systematically implementing a package of incremental policies." This reveals a strong sense of policy continuity and at the same time improves the market's expectations for the sustainability of future incremental reforms.At the press conference, Zheng Shanjie introduced the five specific measures for implementing a package of incremental policies with greater force: strengthening macro policy counter-cyclical adjustment, expanding domestic effective demand, increasing the intensity of enterprise assistance, promoting the real estate market to stop falling and stabilize, and boosting the capital market.

"The combination of these five aspects has an internal logic. Macro control counter-cyclical adjustment is the overall requirement, expanding domestic effective demand is the main direction of attack, increasing the intensity of enterprise assistance is to create a good environment, promoting the real estate market to stop falling and stabilize is to solve the biggest risk, and boosting the capital market is the key point to grasp expectations. Some policies first propose the direction, and then the departments responsible for the division of labor propose detailed measures." Dong Yu, the executive vice president of the China Development Planning Research Institute of Tsinghua University, analyzed.

However, due to the lack of specific stimulus measures, this post-festival press conference, which was highly anticipated, was labeled as "not up to expectations" by some investors, and the capital market also cooled down accordingly.

"You can't just look at the numbers when looking at policies. Some policies can be quantified, while others cannot be quantified." Dong Yu said, "The 'X trillion' statement, although it is quite vivid and moving, is also popular among people, and people wish it could be higher and higher, but such policies have a specific scope of application, and it is also impossible to only talk about the numbers in this regard at every press conference, because economic policies are not a number game. There is a kind of rhythmic statement that is good at stepping on the beat, first deliberately using numbers to raise appetite, and then casually saying 'not up to expectations'. This is actually a trick to cooperate with short positions to make a move, and it is to manipulate the market by mobilizing emotional fluctuations to profit from it, which needs to be identified. We believe that the increment will definitely include new investments, and 'X trillion' will definitely be there, but some may still need to go through legal procedures, and everyone should be a bit patient and not be easily led by the rhythm.

The key point to grasp expectations

As Dong Yu said, boosting the capital market is the key point to grasp expectations.

On October 9, the new progress of the "cooperation" between the central bank and the Ministry of Finance was announced - the central bank and the Ministry of Finance established a joint working group for the purchase and sale of government bonds, and held the first formal meeting of the working group, proposing to "continue to strengthen policy collaboration" and "provide a suitable market environment for the central bank's government bond trading operations".

On October 10, the central bank took new actions again, and China's first monetary policy tool to support the capital market was implemented - the securities, fund, and insurance company swap facility (SFISF) will accept applications from today.

Industry insiders said that the implementation of the swap facility as a monetary policy tool will provide hundreds of billions of incremental funds for the capital market. According to the central bank's announcement, the scale of the first phase of the swap facility operation is 500 billion yuan, and the scale of operation can be further expanded according to the situation. The funds obtained through the use of the tool can only be used to invest in the stock market.

Industry experts said that the swap facility is a "swap for swap" and does not expand the scale of base money issuance, nor is it a quantitative easing. Through the swap facility operation, non-bank institutions can replace the assets with poor liquidity in their hands with government bonds and central bank bills, which is convenient for repo or selling financing in the market.China Minsheng Bank's Chief Economist Wen Bin stated that although there is no issuance of base money, drawing from international experience, the Federal Reserve introduced a similar Term Securities Lending Facility (TSLF) during the subprime crisis, which played a significant role in the rapid stabilization of the financial market.

Wall Street's major banks have quickly turned "bullish" on China's capital market, but they also anticipate additional policy reinforcement.

US investment bank Goldman Sachs stated that the People's Bank of China is providing unprecedented support to the stock market. "History suggests that there may be more room for this round of increases in the Chinese stock market," said Goldman Sachs in its research report. The government has shown its hand, and since September 24th, the Chinese government has announced more than 10 key measures covering monetary easing, fiscal stimulus, real estate market support, and stock market incentives, all of which are of milestone significance in terms of magnitude, breadth, and comprehensiveness.

Goldman Sachs said that the Chinese market is changing the "rules of the game," with coordinated and strong policies triggering a significant rebound in the stock market. The equity strategy team at Goldman Sachs Research believes that if subsequent policy commitments and earnings are realized, this round of rebound is expected to last longer.

The world's largest asset management firm, BlackRock, recently upgraded its tactical allocation to Chinese assets from "neutral" to "moderately overweight," expressing optimism about the growth potential in the technology and consumer sectors.

HSBC upgraded its rating for the A-share market from "neutral" to "overweight." The bank believes that a series of stimulus measures have been introduced, marking a turning point in the market and potentially providing an opportunity to outperform the broader market, with the valuation of the A-share market still attractive and not too late to enter.

Morgan Stanley stated that if the Chinese government announces more spending measures in the coming weeks, the Chinese stock market could rise by an additional 10% to 15%.

UBS Global Financial Markets Head of China, Fang Zhuming, said that under the impetus of recent strong policy signals, market expectations have changed significantly, and investor confidence has been significantly restored. The implementation of macro policies, whether there will be further reinforcement, and the efforts on the fiscal side have become the focus of foreign capital. Fang Zhuming believes that the key next step is to follow up on the fundamentals. In addition to the implementation and stability of existing policies, it is important to introduce new policies and continue to effectively convey positive signals.

Policies that cannot be measured by numbers

At the press conference of the National Development and Reform Commission, there is another term that should not be overlooked, that is, the development environment of the private economy.The press conference did not shy away from the prominent issues raised by entrepreneurs regarding "unauthorized cross-regional law enforcement" and "law enforcement for profit," but clearly stated that "supervision will be carried out when necessary."

In the afternoon of the same day, Premier Li Qiang of the State Council presided over a symposium with experts and entrepreneurs on the economic situation. At the meeting, Li Qiang emphasized that the key to stabilizing the economy is to stabilize enterprises. This symposium further demonstrated the central government's attitude of "facing difficulties head-on, actively responding, effectively resolving prominent issues in economic operations, paying attention to market voices and social concerns when formulating and implementing policies, and continuously boosting confidence in development."

Subsequently, on October 10th, the Ministry of Justice and the National Development and Reform Commission published the "Private Economy Promotion Law (Draft for Comments)" on their websites, openly soliciting opinions from society.

"Some policies can directly leverage huge funds, while others, although not involving investment, are invaluable," said Dong Yu, indicating that the introduction of the Private Economy Promotion Law is of no less significance to the economy than "X trillion."

Guo Liyan, a researcher at the China Macroeconomic Research Institute, stated that the actual "increment" can also be an "increase in quality," further regulating the administrative law enforcement behavior of administrative law enforcement units involving enterprises. This policy is difficult to quantify, but its role in economic and social development is very significant. From a "quality" perspective, it represents a significant advancement.

Ren Zeping, a renowned economist, posted on social media that if confidence in the private economy is boosted, the current large-scale economic stimulus policies can have a multiplier effect, and government investment can drive greater private investment, achieving a small force moving a great weight. Ren Zeping analyzed that the private economy is the source of market economic vitality, contributing "56789," which means the private economy contributes more than 50% of China's tax revenue, over 60% of GDP, over 70% of technological innovation achievements, over 80% of urban labor employment, and over 90% of the number of enterprises.

"With vitality, confidence, and active investment in the private economy, China's economy can bottom out and recover, and employment, finance, innovation, and other aspects can improve accordingly, and stock market prosperity and real estate market stabilization can be achieved," said Ren Zeping.

The financial sector press conference on September 24th sounded the clarion call for this round of regulation, the Central Political Bureau meeting on September 26th issued a general mobilization order, the State Council executive meeting on September 29th made systematic arrangements, and the National Development and Reform Commission press conference on October 8th introduced a package of policies. Dong Yu stated, "It can be clearly said that this is just the beginning, a general signal sent by the central government in economic work, and subsequently, we will definitely see various departments introducing policies conducive to the economic recovery and improvement in accordance with their responsibilities."