While China’s latest stimulus package may not have lived up to investors’ expectations, fund managers have not completely ruled out a Chinese economic recovery, suggesting that stronger, more targeted stimulus support could eventually lead to a strong recovery.

During a much-anticipated news conference on Tuesday (China Standard Time), Zheng Shangjie, chairman of China’s National Development and Reform Commission, outlined several measures to stimulate the economy, expressing China’s “full confidence” in achieving its growth target of 5 percent per year.

China, Zheng said, will load up 100 billion yuan (US$14.19 billion) from its 2025 central budget. for investment and another 100 billion yuan for projects supporting core strategies and key areas.

Other measures to stimulate domestic spending and support the property market were also announced, but were called "vague" by Jun Bei Liu, portfolio manager at Tribeca Investment Partners.

Speaking to InvestorDaily, the portfolio manager said she was disappointed by the lack of details, especially given the significant build-up leading up to the press conference.

Economists earlier noted that more fiscal stimulus would be needed after the People's Bank of China (PBOC) announced a monetary stimulus package last month that included cutting reserve requirements ratios and interest rates, lowering mortgage rates and the requirements for an advance payment for a second home and applying new structural instruments of monetary policy to support the stock market.

While market sentiment initially improved, it quickly became clear that these monetary measures were unlikely to be enough to stimulate domestic growth. At the time, the stimulus' focus on infrastructure investment, social spending and local government funding was seen as key to boosting China's slowing economy.

“Before [latest] announcement, there were expectations that 2 trillion yuan would be returned, like helicopter money, to be injected into the economy. Everything they said [on Tuesday] was to really reinforce what they've announced so far, which to me is disappointing," Liu said.

She pointed out that a key issue hampering China's efforts to reverse its economic decline and restore confidence is the government's tendency over the past 18 months to implement small measures and give vague indications of potential stimulus.

The hours following Zheng's statement saw volatile trading in Chinese markets. The Hang Seng index initially fell about 9%, while the Shanghai Composite rose 4.6%.

As of October 9, 4:00 p.m. AEST, both indices were down, down 1.4% and 5.3% respectively.

According to Liu, while the new stimulus coupled with the PBOC's announcement last month is certainly welcome, investors are looking for "something bigger" to revive confidence in China's economy.

Right now, she thinks they've given up on the prospect of a sharp recovery.

"There will be a recovery, but it will be very slow and I think certainly until the end of this year things will continue to be slow." By next year, we hope it will start to improve,” she said.

However, Liu believes there are still opportunities in the Chinese market, especially in consumer-oriented companies. She pointed out that despite the new stimulus measures, Chinese consumers have already received significant liquidity and support and once confidence improves they will have the "firepower" to spend.

"At the end of the day, people have to relax and realize that the Chinese economy is going to turn around eventually, and it's just about confidence, which can turn around pretty quickly," she said.

"What the government really needs is a series of announcements just to maintain confidence." Obviously they are disappointed with this one and there were so many expectations, [but] I think it's not too far because they can't afford the economy to falter.

Nicholas Yeo, head of China equities at abrdn, noted a "significant divergence" between valuations and earnings for quality Chinese companies, stressing that improved liquidity from the PBOC could lead to sustained rerating and more rational market behavior, potentially leading to upward revisions of earnings.

“The missing part of the equation for high-quality Chinese stocks is liquidity, which the PBOC has addressed directly. There is an opportunity for a long, drawn-out revaluation of these companies given how negative sentiment has become,” he told InvestorDaily.

With improved liquidity in the market, he expects "more rational behaviour", suggesting that upward revisions could emerge in 2025, picking up from this year's low teenage income growth.

Yeo stressed that the government must provide fiscal stimulus for the rally to be sustainable, noting that the recent package could signal "new urgency" to address the economic slowdown and represent a "step change" in policy intentions.

Earlier this week, the World Bank warned of a slowdown in the second-largest economy.

It said China's growth would slow from 4.8 percent this year to 4.3 percent in 2025. against the challenges of low consumer and investor confidence, persistent property market weakness and the structural headwinds of global tensions and an aging population.

Noting that while fiscal support "may lift short-term growth," the World Bank warned that longer-term growth "will depend on deeper structural reforms."