Mark Tinker, head of AXA IM Framlington Equities Asia, cautioned it was “not to say that the fundamentals have improved, rather that the ... markets had become over-extended to the downside”.

“This rotation will have been extremely painful for many, but as ever, we must not confuse this with underlying fundamentals,” he said.

Many economists say the mainland economy has yet to bottom out, and arguably increasing its dependency on an already overheated property industry. Based on concerns over a rickety, debt-laden financial system, rating agency Moody’s has downgraded the outlook for mainland sovereign and banking sector credit.

Meanwhile, as top officials, deputies and delegates discussed policies and development plans in Beijing during the annual meetings of the National People’s Congress and Chinese People’s Political Consultative Conference (CPPCC), thousands of miners took to the streets of Shuangyashan, Heilongjiang province, to protests against job cuts and delays in salary payment – highlighting the authorities’ predicament as they seek to push ahead with reform of zombie state-owned companies in sectors plagued by overcapacity and switch from an “old economy” to a “new economy”.

However, during the “two sessions”, the situation has temporarily looked far more stable, certainly more stable than some of the more hyperbolic assertions by China bears.

Official data showed a smaller than expected decline in the mainland’s foreign exchange reserves last month – down “only” US$28.6 billion, following drops of US$99.5 billion in January and US$107.9 billion in December.

People’s Bank of China (PBOC) deputy governor was markedly upbeat on the mainland’s capital outflow outlook and the quality of its foreign exchange reserves during a press conference on the sidelines of the CPPCC meeting last week.

Enterprises were improving their balance sheets as they repaid US dollar-denominated debt and expanded spending overseas, Yi said. “But this kind of demand is limited and the capital outflow will be back to normal,” he said.

Alex Wolf, an economist for emerging markets at Standard Life Investments, said it seemed policymakers were making a concerted push to stabilise expectations.

“I think they have learned their lesson about how lack of communication or unclear communication can lead to market volatility, and they are clearly trying to display confident and consistent communication to guide the market and deter short sellers,” he said.

By last week, the yuan had wiped out most of its losses against the US dollar earlier this year. The PBOC set the currency’s mid-price against the greenback at its strongest level this year on Friday.

Iris Pang, a senior economist with Natixis said, “It seems that the PBOC has successfully managed market sentiment from a one-way bet of depreciation to a more stable yuan.”

Since January, the PBOC has intervened in the offshore markets, buying yuan and selling US dollars, pushed up the interbank lending rate for offshore yuan and tightened up control on capital accounts.

On Tuesday, Bloomberg reported the mainland’s central bank had drafted rules for a tax of foreign exchange transactions in an effort to curb currency speculation.

But Pang said she did not think expectations for a weaker yuan had fully reversed, because a good part of what was happening was not market driven, but the outcome of heavy-handed intervention.

Alex Fan, managing director at GF Securities in Hong Kong, said he would “stay defensive” on China equities, in both the Hong Kong and mainland markets.

“There are so far no signs of an economic turnaround, with reforms seemingly stuck,” he said.