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Stock market debate

(China Daily/Agencies)
Updated: 2008-04-07 09:21

Public debate on whether the government should prop up the slumping stock market is intensifying.

Caijing Magazine, one of China's most influential business and financial journals, said in its latest issue that all stock markets rise and fall and the government should not intervene, and in fact, there was no reason to intervene.

However, many other newspapers and websites are reporting calls for government help to boost the market which has witnessed an almost 50 percent drop from its peak last October.

The authorities should certainly refrain from a rushed response. But they have no excuse to keep further delaying the plugging of regulatory loopholes that have long plagued the healthy development of the Chinese stock market.

Investors have been hit hard, but this is not because of a major deterioration in the fundamentals of the Chinese economy. Though a US-led global slowdown looks inevitable this year, the Chinese economy is still positioned to expand by at least 8 percent, serving as a key growth engine for the world's economy.

It is the one-third plunge in the stock index in the first quarter, the second-largest quarterly fall in the market's 18-year history, that has the investing public worried. Most of them were of the opinion there was little likelihood the market would fall so sharply in the months ahead of the Olympic Games.

The sharp contrast between the performance of the stock market and that of the national economy has given investors cause to raise their voices for government intervention. Normally, a market with a fast-growing economy and an appreciating currency should see rapid development.

Nevertheless, the warning against unnecessary government intervention demands to be heard. In the nearly two decades of development of the stock market, the government had repeatedly acted under various pressures to bolster it. Such short-term rescue efforts achieved little in promoting openness, equality and fairness in the market. These three elements are essential to the protection of investors' rights as well as to the healthy development of the market.

Market regulators must exercise patience and prudence especially when the market is undergoing a drastic correction. They must find workable solutions to the current troubles.

If the regulators find that investors' fears about excessive refinancing by listed companies are genuine, they must act to quell these fears. Prompt actions to improve regulations and market order are always needed.