Perhaps the Chinese government gets the message. At long last.

On Wednesday, Zichen Wang published a translation of an interview with Jia Kang, in which Jia suggested China has scope to issue nearly $1.5 trillion in special debt with the proceeds earmarked for fiscal stimulus. He didn’t specify a timeframe.

Wait, who’s Zichen Wang? And who’s Jia Kang, for that matter?

Good questions. Zichen’s a Xinhua News veteran who founded Pekingnology, a widely-followed newsletter that counts as a must-read if you’re the sort of person who’s inclined to Party divination. The backstory’s a bit convoluted, but suffice to say Zichen, a Masters candidate at Princeton and research fellow at a Chinese think tank, does the world a service: He highlights and translates notable public communications both from “private” Chinese thought leaders and Party officials. Pretty much every major Western media outlet has cited or otherwise referred to Zichen at some point. So, if you enjoy reading the CCP tea leaves in English, Pekingnology might be for you.

I’d be remiss (and naive) not to quickly note that there’s no such thing as a “Beijing-based non-governmental organization,” which is how the think tank Zichen belongs to describes itself. That’s a contradiction in terms. With all due respect, the think tank where Zichen works — The Center for China and Globalization — isn’t wholly independent of the Party. Maybe it’s “independent” as Chinese think tanks go, but that’s a low bar.

Jia’s a somebody too. Much more of a somebody than Zichen. He (Jia) used to run the Institute for Fiscal Science which, as Zichen noted, was a predecessor of the Chinese Academy of Fiscal Sciences, another think tank. It operates inside the finance ministry.

The interview with Jia that Zichen highlighted on October 2 was conducted by The Paper, a Shanghai-based media outfit which, pretensions to editorial latitude aside, is obliged to parrot the Party line just like every other mainland publication.

With that hopelessly belabored backstory, what did Jia say? Well, among other things, he said the following when asked about last week’s Politburo meeting:

This meeting had a strong problem-oriented focus. In short, we must introduce “big moves” with a sense of responsibility and urgency. The key principle of incremental fiscal policy should be to focus on investment, with long-term bonds supporting the government’s role in making effective investments. Regarding the scale of fiscal stimulus, we should pay attention to its proportionate size. For instance, in 2008, China introduced a CNY4 trillion economic stimulus plan, which amounted to more than 10% of the national GDP at the time. In 2023, China’s GDP exceeded CNY126 trillion, yet the budget adjustment plan in the last quarter of last year only issued CNY1 trillion in additional government bonds. This year’s first batch of special long-term government bonds was also CNY1 trillion, representing less than 1% of GDP. Therefore, scaling up the bond issuance to CNY4 trillion — or even CNY10 trillion — would not be excessive.

Now that — somewhere between CNY4 trillion and CNY10 trillion — would be a proper bazooka.

I’ve repeatedly maligned the Party for failing to appreciate the extent to which i) lowering the cost of money — i.e., rate cuts — won’t work when there’s no demand for credit and ii) Chinese consumers need an unequivocal sign that Xi Jinping’s committed to fixing at least some of what he broke. Although market participants were keen to bid up Chinese equities following the PBoC’s easing blitz, and while media reports suggested the above-mentioned special bond issuance could reach CNY2 trillion, everyday Chinese aren’t going to go out and buy a house just because Chinese brokers have a green light from Pan Gongsheng to buy local stocks. Maybe the wealth effect from what’s quickly morphed into an “insane” bull market will revive consumption temporarily, but that’s not a sustainable fix when the rally’s based in part on artificial demand.

If, however, the Party indicates it’s open to something on the order of the figures Jia floated, Xi might have a real shot at restoring confidence and shaking the “garbage” label some brave Chinese souls have applied to his economy.

Obviously, the government isn’t going to up and announce CNY10 trillion in special bond issuance next week once the holiday’s over, but the signaling’s important. People like Jia don’t float this sort of thing without running it by somebody first. This is China we’re talking about: You can’t, as someone with any kind of name recognition, voice your opinion on something important if you haven’t cleared the gist of it with Beijing.

The takeaway: The Party’s at least considering ongoing special bond issuance earmarked for fiscal stimulus until things turn around. In other words: A fiscal “whatever it takes.”

Anyone who bought into the stimulus rally should hope and pray that’s accurate. Because… well, because it’s one helluva rally.

H-shares (remember mainland markets are closed for Golden Week) slipped on Thursday, but it was the first down session in two weeks. Somehow, “escalatory” seems insufficient as an adjective to describe the rally illustrated by the simple figure above.

Consider: Hong Kong-traded Chinese shares rose a ridiculous 34% across 13 consecutive daily gains. If that seems silly to you, that’s because it is. This was a singularly ludicrous move. As Goldman’s Scott Rubner put it, “I’ve never seen this much daily demand for Chinese equities.”

That’s a lot of stimulus front-running, and ironically, it could work against itself. “Beijing will surely roll out a raft of fiscal measures and other supportive policies, but the eventual scale [is] uncertain due to the brewing stock bubble,” Nomura’s Lu Ting remarked, calling the internal Party debate around the proper course of action “still-controversial.”

As for Jia’s interview, Zichen painstakingly bolded key passages, but playfully noted that “it’s easy to tell Jia’s core message just from the title.” That title — i.e., the headline The Paper chose — reads as follows: “Fiscal ‘big moves’ should closely follow monetary ‘big moves.'”

Now all Jia has to do is convince the big man.