Chinese stocks led the Asian market hikes on Tuesday, closing up as much as 1.6 percent, as China released favorable signals to support the economy with more “vigorous” fiscal policy.

Shanghai blue chips surged 1.5 percent to a one-month high, while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6 percent.

China’s state council said on Monday “the proactive fiscal policy should be more proactive” in order to spur growth, according to the state-run television, amid an increasing concern by the Chinese government on the sluggish economy under the escalating trade tensions with Washington.

Beyond potential fiscal stimulus is chatter that the anticipated cut to reserve-requirement ratios may come later this quarter, following the unexpected move by the central bank PBOC to lend 502 billion yuan ($74 billion) to financial institutions through its one-year medium-term lending facility (MLF), gearing up to supporting the slowing growth.

China’s economy saw weak growth in the recent quarter, with the slowdown of several major indicators including the fixed asset investment in Q2.

The world’s second economy vowed to crack down shadow lending and fight against financial risks. The latest regulation draft of asset management business launched last week lowered the individual investors’ minimum purchase of wealth management products, and eased near-term concerns about systematic liquidity due to overtightening.

But the cabinet also said the prudent monetary policy should be adjusted to reach a moderate balance, alerting to avoid monetary over-easing.

The 10-year government bond yields jumped and the offshore yuan hit a one-year low, as the market bet on further easing in the monetary pool.

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