But analysts believe it is still too early for the policymakers to put a brake on the stimulus, though asset bubbles and inflationary expectations are presenting risks.

A relatively loose monetary policy is still necessary to uphold the market confidence, said Wang Qing, a senior economist with Morgan Stanley, in a report.

Fund Chill

With the stock market on a roller coaster of a ride, Chinese investors are correcting their gains, with no exception given to fund management companies.

According to a report by Tianxiang Investment Consulting Co. Ltd. based in Beijing, 502 funds operated by the country's 60 fund management companies racked up painful losses totaling 55.43 billion yuan ($8.1 billion) in the third quarter, reversing a two-quarter profit-making streak.

After roaring back from a rock bottom position earlier this year, the stock market entered a volatile stretch in August when the Shanghai Composite Index tumbled around 20 percent. Investor sentiment turned sour on worries that liquidity could dry up as regulators allowed a flood of initial public offerings.

There is little wonder that the biggest losers were the equity funds that reported a combined loss of 46.2 billion yuan ($6.8 billion) from July to September. In addition, a significant letdown in the bond market also forced bond funds into the red. Growing wary of market turbulence, investors are pulling back their risk exposures, promoting a wave of redemption requests. This has led to a net cash outflow from the funds—around 5 percent of their total portfolios, the report stated.

The only bright spot was the qualified domestic institutional investors (QDIIs) that raked in a juicy profit of 6.9 billion yuan ($1 billion) thanks to their access to overseas stocks. Absorbing the good news of the world economic recovery, global stock markets have been bouncing back amid world-wide recovery. The Dow Jones Industrial Average index, for instance, has staged a 34-percent uptick since February.

Looking ahead, a majority of QDII managers are convinced of a bullish prospect on the horizon. But Zhou Quan, Manager of the Huaxia Global Selected Stock Fund cautioned that after a prolonged rally in global shares, their valuations look much less attractive now than six months ago.

Auto Restructuring

The China Ordnance Equipment Group Corp. (COEGC), parent group of Chongqing-based Chana Automobile (Group) Liability Co. Ltd., signed an agreement with the Aviation Industry Corp. of China (AVIC) to purchase the latter's vehicle assets to build a restructured Chana Automobile.

Under the agreement, the biggest merger between China's state auto companies, COEGC will take over the AVIC's shares in minivan maker Harbin Hafei Automobile Industry Group, Changhe Automobile, engine maker Dong'an Power, Changhe Suzuki and Dong'an Mitsubishi.

In return, AVIC will get a 23-percent stake in the restructured company, with the rest held by COEGC.

The deal is part of a wider shake-up of China's auto industry to consolidate the fragmented auto sector and create major players with international competitiveness. Earlier this year, Guangzhou Automobile agreed to take a 29-percent stake in sport utility vehicle maker Hunan Changfeng Motor.

Analysts believe the merger will be a powerful catalyst for Chana Automobile to quickly boost its capacity and build a solid market foothold. In addition, it allows AVIC to focus on its core aviation business, they said.

Xu Liuping, Chairman of the Board of Chana Automobile, said in a statement that the newly-merged company is gearing up to sell 2.6 million vehicles in 2012 and 5 million in 2020.

Alibaba Loses Shine

Alibaba.com, the world's largest online market for B2B (business-to-business) trade, reported its lowest profit in three quarters as heavy investment costs put a squeeze on margins.

Net profit of the company was 236 million yuan ($35 million) in the third quarter, diving 20.4 percent year on year. The profit was dragged down by a spending spree on marketing, research and development, said the company.

Alibaba is pressing ahead with a spending plan, including a $30-million budget set aside for marketing in the United States and Europe this year to attract more traders to the site.

To enhance its market penetration, it has introduced the "Ali-Express" that allows corporate traders to pay for online transactions. Alibaba charges the sellers a certain amount of fees based on the trade value, a new alternative from the current pay-up-front membership fee they charge to customers regardless of how many sales they make.

In addition, the e-commerce site came up with new membership packages that provided less services but are also 60 percent cheaper than regular "Gold Supplier." David Wei, Chief Executive Officer of Alibaba.com, said the program aims to increase the website's paying-customer base even at the sacrifice of its profit margins.

Though it takes time for the measures to translate into torrid revenue growth, they have been instrumental in grabbing market shares. Alibaba's number of paying members was 578,900 at the end of September, a robust increase of 45.3 percent year on year.

"We remain optimistic about the outlook for the trading platform as price-sensitive traders would prefer to do business online to cut their costs in these difficult times," said Wei. "A solid base of customers is bound to polish the prospect for future growth."