After a three-year slump, the Chinese stock market is finally on a hot streak. In April, the MSCI China index, covering 85% of China’s equity market, surged by 10%. Compare that with the S&P 500, which sank 1.3% during the same period. This 20% rebound has pushed both of China’s stock markets back into bull market territory.

• Government stimulus is the driving force behind this boom — and restrictions placed on hedge funds’ short-selling have also likely helped.
• Banks have responded positively to China’s measures, with UBS re-rating China’s stock market as “overweight” and Goldman Sachs boosting their China growth forecast.

Uphill battle ahead: Not everything is rosy. If China’s unemployment remains as high as it’s been for years, demand could stay low — posing a challenge for the stock market to maintain this rally. So far, interventions by Xi Jinping’s administration have improved other macro indicators, with increased factory activity and exports. To sustain this growth, China might resort to a measure rarely seen in its economy: quantitative easing.