SHANGHAI China has enlisted $800 billion worth of public and private money to prop up its wobbly stock markets, a Reuters analysis shows, but the impact of the unprecedented government-orchestrated rescue has so far been modest.
Public statements, media reports and market data reveal that Beijing unleashed 5 trillion yuan (515 billion pounds) in funds - equivalent to nearly 10 percent of China's GDP in 2014 and greater than the 4 trillion yuan it committed in response to the global financial crisis - to calm a savage share sell-off.
But while the 2008 stimulus package staved off recession, analysts wonder what benefit the stock rescue package can bring to offset the risk the government is buying stocks at valuations private investors are no longer willing to pay.
"I'm quite negative towards the rescue," said Yang Weixiao, analyst at Founder Securities in Beijing.
"The problem is, all these measures only change the supply-demand relationship, without changing the fundamentals. So there's no real support, and the calm could be only temporary. If the governments exits the bailout, prices could accelerate their journey back to fundamentals."
Indeed, there are already some signs the government may be backing off from aggressive share purchases.
A plan to raise 100 billion yuan by China Securities Finance Corp (CSFC), the state-backed institution that provides margin financing, has been delayed, four sources familiar with the matter told Reuters on Monday.
On Thursday the CSFC admitted that it had reduced stakes in some listed companies to bring it below a regulatory threshold, but said it had transferred the shares, not sold them.
Respected private finance magazine Caijing also reported that the CSRC was considering withdrawing money from a stabilization fund, roiling markets before CSRC denied the story.
It's hard to tell how much state money has actually flowed into the market, given the opacity of some of the investing institutions.
But Beijing's policy goal is not to prop up values by buying the stock market outright, but rather to entice private money back to the market, surfing a wave of incoming government money.
"Presumably the whole point is to say that you are going to spend this money, and then by saying it you don't actually have to spend it," said Andrew Batson, an economist at Gavekal Dragonomics in Beijing.
The combined measures, rolled out in a flurry of announcements earlier this month, included a 120 billion yuan stabilisation fund created by a core group of brokerages and 1.3 trillion worth of bank loans to state-backed margin finance companies.
Potential inflows created by tweaking investment rules for pension funds amount to 600 billion yuan, while allowing insurers to invest up to 40 percent of their assets in stocks could generate an estimated 2.9 trillion yuan. ((For a table of support measures, click)).
There have also been share buybacks announced by key stakeholders, and funds invested by the state-owned asset manager Central Huijin, plus a double-barrelled burst of monetary policy stimulus by the central bank in late June that explicitly targeted stock market stabilisation.
But the response has been lukewarm.
While the market stabilised, with the Shanghai Composite Index .SSEC recovering about 20 percent by Thursday's close from a low point around 3,300 points struck on July 8, it is still below the semi-official recovery target of 4,500 points.
Beijing has thus produced the equivalent of around 1 index point gain for every $1 billion committed.
And market stability remains untested given the large numbers of companies still subject to trading halts. Reuters calculations show that around 20 percent of listed companies in Shanghai and Shenzhen are not trading at present, down from around 40 percent before but still extremely high.
An analysis by Everbright Securities of fund flow data showed that while government flows into mutual funds targeted for government intervention rose sharply in recent weeks, private inflows into new stock funds have collapsed.
The other major problem with Beijing's strategy, Batson at Gavekal Dragonomics pointed out, is that many Chinese firms are still trading at stratospheric valuations.
Even after the early-summer meltdown that saw markets shed around a third of their value in a little more than three weeks, the Shanghai Composite Index .SSEC is still up nearly 100 percent from 12 months ago, with an average price-to-earnings ratio of 17.64 - higher than the Dow Jones Industrial average P/E of 16.12.
The average P/E on the Shenzhen stock exchange .SZSA is 47.23, while the small-cap ChiNext growth board .CHINEXTC is a heady 98.07.
"If valuations are mean-reverting over time, which a lot of people think they are, that means that valuations could go down in the future," said Batson. "Which means that whatever buying the government does today could end up imposing a longer-term financial cost."
Though Chinese major stock market indexes rose on Thursday, and are now set to gain for the third consecutive week, futures markets are still pricing at a discount to current values, betting that the CSI300 index will fall back to around 4,000 points by next March.
(Additional reporting by Samuel Shen; Editing by Alex Richardson)