China's economy has struggled in recent months amid a depressed level of consumer confidence and a devastating housing bust coupled with weak credit demand. Late in September—just after the U.S. Federal Reserve announced its first federal funds rate cut in several years—the People's Bank of China unveiled a three-part monetary stimulus program to reduce reserve requirement ratios (the amount of cash banks are required to keep on hand), mortgage rates and down payment requirements, and more.

Some economists view monetary easing of this kind as limited in its potential impact during an economic downturn. Still, the immediate response of Chinese markets to the announcement has been a flurry of activity and a significant rally. The CSI 300, an index representing 300 of the largest publicly traded, Chinese-listed companies, is up by nearly 24% in the last month. Following the stimulus reveal, it had its single best day in nearly two decades.

A dip in Hong Kong stocks late in September prompted investors to speculate about how long the rally would continue. Indeed, consensus seems to be growing that a sharp reversal may be in store at some point if the stimulus measures are deemed to be ineffective overall. Still, there are several companies investors may wish to focus on during the boom.

NIO: Jolt for EV Maker

The Chinese government's stimulus package has helped to propel EV maker NIO Inc. (NYSE: NIO) upward by more than 55% in the last month, though the stock remains down more than a quarter overall in the last year.

Besides the boost tied with the broader Chinese equities space, NIO has experienced added momentum thanks to its late-September announcement of a RMB3.3 billion investment in its NIO China subsidiary from external investors, alongside a commitment of an additional RMB10 billion that NIO itself will make.

Still, investors should exercise caution when it comes to NIO shares. Despite surging in recent weeks, the company faces stiff competition domestically and unfavorable tariffs in other parts of the world that are likely to limit its ability to undercut the Model Y from competitor Tesla Inc. (NASDAQ: TSLA) with its new affordable ONVO L60 offering.

TME: Earnings and Cash Flow Growth

Tencent Music Entertainment Group (NYSE: TME), the online music and entertainment streaming platform provider, has massive earnings growth potential. Analysts project 27.4% earnings growth this year, far ahead of the wider industry. The company already posted a 33.1% year-over-year improvement in net profit in the latest quarter, driven by an increase in online music subscribers and improved retention rates.

Tencent has coupled this rapid bottom-line growth with steady improvement in cash flow as well, allowing the company to sustainably expand its operations. If China's stimulus program is effective at boosting consumer spending, Tencent is likely to be a major recipient.

MCHI: Broad Market Coverage and Attractive Liquidity

Investors looking to lean toward Chinese equities more broadly and without focusing on a single firm may look to the iShares MSCI China ETF (NASDAQ: MCHI). This fund provides wide exposure to nearly 600 large-cap Chinese firms.

While it is not the cheapest broad-based China-focused ETF based on expense ratio, it provides superior liquidity and a strong asset base relative to some of its less-expensive competitors.

MCHI is up by more than a third in the last year, sharply outpacing the CSI 300 during that same period.

Impact of Additional Stimulus Measures

China's government spending is currently below budget due to minimal capital investment projects and a lack of government revenue. In response, the government is reportedly considering issuing about $284 billion in special sovereign bonds in the coming weeks. This would likely further boost the Chinese economy, particularly in household consumption and at the local government level.

In the meantime, China's economy is not out of trouble just yet. Investors should be cautious about the rapid uptick in many Chinese equities and keep in mind that the rally may be short-lived. Still, some individual companies—and even the broader Chinese market—may still offer room for growth. Indeed, some non-Chinese companies also stand to benefit from a continued rally thanks to this stimulus package.