Amidst a significant downturn in China's stock market, the country is reportedly contemplating a multi-billion dollar rescue package to stabilize the situation.

What Happened: The Chinese government is considering a series of measures to address the plummeting stock market. These measures could be announced as early as this week, Bloomberg reported on Tuesday.

The authorities are looking to mobilize approximately 2 trillion yuan ($278 billion), primarily from the offshore accounts of Chinese state-owned enterprises. This fund would be used to purchase shares through the Hong Kong exchange link. Additionally, at least 300 billion yuan of local funds would be allocated to invest in onshore shares through China Securities Finance Corp. or Central Huijin Investment Ltd.

Other options are also under consideration, and some of these measures may be announced this week if approved by the top leadership.

China Securities Regulatory Commission did not immediately respond to Benzinga's request for comment.

The ongoing discussions highlight the urgency felt by Chinese authorities to counteract the recent stock market decline. The nation's retail investors, many of whom have been affected by the prolonged property downturn, are also a key focus for maintaining social stability.

Why It Matters: The Chinese stock market has been facing significant challenges in recent times. This slump comes on the heels of a massive 87% drop in foreign investment in 2023, raising concerns about the country's economic growth. This decline in foreign investment was attributed to global fund managers' growing pessimism about China's future, following a default on bond payments by a developer in August.

Despite attempts to fortify the financial system against decelerating growth, Chinese stocks remained lackluster on a global scale. This has led to a debate on whether Chinese stocks and the broader emerging markets represent an attractive investment opportunity or a value trap.

Chinese Premier Li Qiang has been actively working to draw foreign investors to China, emphasizing the country's stability and potential for high returns on investment. However, the recent stock market slump has added to the challenges facing foreign investors considering China.

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