In a significant shift, global investors are cautiously positioning themselves for renewed investment in China, spurred by Beijing's recent efforts to combat its economic slowdown. While a swift growth boom isn't expected, analysts note that government initiatives aimed at reviving consumer spending and enticing capital into the stock markets have made Chinese equities more attractive.

Major investment groups, collectively managing over $1.5 trillion in assets, have noted a promising shift. Gabriel Sacks, portfolio manager at Abrdn, revealed the company recently made selective investments in Chinese stocks following Beijing’s strong economic support pledges. He emphasized a disciplined approach, highlighting that despite the risks, the upside potential now appears more significant.

China's economy is under pressure, with factory activity contracting for the fifth consecutive month and the services sector slowing sharply in September. As the country aims for a 5% growth target in 2024, many believe Beijing will need to implement further measures to bolster the economy.

Hedge funds have driven recent stock market rallies, but long-term institutional investors have remained cautious. Despite this, some fund managers have started to increase their Chinese equity holdings. Natasha Ebtehadj of Artemis Fund Managers noted that improving government policies have fueled optimism, prompting her to boost her China positions.

Although Chinese stocks recently saw their best daily performance since 2008, experts warn against expecting consistent short-term gains. The rally has been largely driven by technical factors, including short sellers unwinding bets on declining share prices. Investors like George Efstathopoulos of Fidelity International urge caution, suggesting that the market still relies heavily on liquidity rather than fundamentals.

Beijing’s latest measures focus on fostering sustainable household demand, a departure from previous growth strategies centered on real estate or infrastructure. Mark Tinker of Toscafund Hong Kong commended this shift, arguing that sustainable demand, not quick fixes, is key to long-term economic stability.

Despite mixed reactions, some investors are optimistic about China's longer-term prospects. Luca Paolini, chief strategist at Pictet Asset Management, pointed out that U.S. interest rate cuts could stimulate global demand, benefiting Chinese exports. Meanwhile, Noel O'Halloran of KBI Global Investors confirmed that he began buying Chinese stocks earlier this year and sees continued upward potential.

While investors remain cautious, the consensus is that China's stock market is showing signs of improvement, with the potential for growth as economic policies take hold.