Stock Market Causes Heated Debate

China's 10-year old stock market has become a hot topic of discussion in National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC) sessions.

"There are some irregularities on the stock market," said Xiao Zhuoji, a top economist with Peking University, referring to a number of price manipulations exposed since late last year.

"But as the market was established in a transitional economy it cannot be freed entirely from these problems," Xiao, also a CPPCC member, said during the Fourth Session of the Ninth National Committee of the CPPCC, which concluded on Monday.

The economist said the market on the whole was sound and contributed enormously to the economy.

Until 2000, the stock market had contributed 122 billion yuan (US$14.7 billion) in stamp tax to State revenue. In 2000, the stamp tax accounted for 12 per cent of total tax revenue.

Corporate reforms had helped improve the management of listed firms, Xiao said.

Wu Jinglian, a renowned economist with the Development Research Centre under the State Council, said there were still problems to deal with.

"The over-speculation in the market, if not stemmed, may lead to the collapse of the market," he said during the CPPCC sessions.

Wu has repeatedly warned that over-speculation in the market is dangerous and has suggested strict regulation measures be taken to ensure order in the stock market.

In January, when he was in Shanghai attending a meeting, he attacked the market manipulation and price rigging.

He said the interests of small investors, who are often the victims of manipulation, need to be protected.

"The stock market, with so much speculation, is like a casino," he said.

"In the short term, small investors may profit by buying and selling shares in line with the market trend created by manipulators. But in the long term, they will lose," he said.

His attack sparked a heated debate among top economists, especially after the market slumped in January after Wu's remarks were reported.

In the first trading week after the Lunar New Year, the stock indices decreased by about 8 per cent.

Led by Li Yining, a heavy-weight economist with Peking University, five stock experts, including Xiao, rebutted Wu's remarks.

They said it was common for a new market to experience problems, although regulation was still necessary.

"Problems should be solved according to law, but they should not blur our eyes to the achievements the stock market has scored in the past years," Li Yining said.

Market regulation should not obstruct the development of the market, he said.

The debate has continued during the current NPC and CPPCC sessions and many NPC deputies and CPPCC members expressed their wish to adopt stringent measures to eliminate speculation from the market.

"Prices of some shares are driven up incredibly high by manipulators while shares of some good companies are ignored," said Li Songling, a NPC deputy from Hunan University.

"The market must be regulated to ensure its healthy development," he said.

His call is in line with the central government's view.

"We need to standardize and improve the securities market and safeguard the securities market supervision," Premier Zhu Rongji said when delivering the report on the outline of the 10th Five-Year Plan (2001-05) to NPC deputies last Monday.

"Development should be the central theme," he said.

Since July 1, 1999 when the Securities Law was enacted, the China Securities Regulatory Commission, the market regulator, investigated 236 cases of alleged market manipulation. Punishments was delivered to 142 people and 88 institutions with fines totalling 466 million yuan (US$56 million).

(China Daily 03/13/2001)