Hong Kong's Hang Seng Index was 2.6% higher as of 5 p.m. local time on Tuesday after falling about 10% this year to date. Meanwhile, the CSI 300 — which tracks 300 Shanghai and Shenzhen-listed stocks with the largest market capitalizations — was 0.4% higher but still down 6% so far this year.

Bloomberg's report, citing unnamed people familiar with the matter, came just a day after the People's Bank of China, or PBOC, kept benchmark lending rates unchanged. This disappointed investors who were hoping for a rate cut — which would stimulate loans and investment in the broader economy.

China's signals on the economy appear to be confounding investors and analysts.

"There has been increasing confusion over Beijing's policy stance on the economy," wrote Nomura economists in a Monday note seen by Business Insider.

After all, the country's largest state-owned banks slashed deposit rates in December, boosting expectations of a similar move by the central bank — but that didn't happen, they added.

"Top officials' comments suggest Beijing is reluctant to seek short-term growth at the cost of increasing long-term risks," they added, referring to official commitments to a more sustainable and stable economy after decades of breakneck growth prior to the COVID-19 outbreak.

However, China's economy is struggling to recover after the pandemic. It's facing significant headwinds from both a property crisis and a demographics problem marked by a record-low birthrate. The Asian nation's population contracted for the second straight year in 2023.

As China's economy and markets both flounder, there are signs that President Xi Jinping's administration is dialing back on some overzealous measures to shore up confidence in the economy.

In December, a document released after the annual Central Economic Work Conference suggested regrets over Beijing's fast and furious private-sector crackdown. In the same month, authorities went into damage-control mode after new draft rules regulating video gaming sparked an $80 billion market meltdown.

While such back-and-forth policy adjustments aren't rare for China, a sustained loss in investor confidence is what the country doesn't need at this time.

As Ji Min, a PBOC official wrote in a central bank publication this month, the market pays "close attention" to policy orientation and execution when expectations are weak, per South China Morning Post.

While China's stock market is still in the dumps, some see opportunities ahead.

"We maintain our long-term positive view as we see Chinese equity as a core component of a strategic asset allocation," expert at Amundi, Europe's largest asset manager, wrote in a Tuesday note, citing appealing valuations and attractive longer-term rewards.