1、A Market Health CheckChinas stock market was fraught with breathtaking and chaotic moments throughout the past year and a half. To assuage investors concerns and anxieties， Chinas securities regulator is mulling over new reform measures. From July 2014 to June 12， 2015， Chinas three major stock inde
2、xesthe SSE Composite Index， SZSE Component Index and ChiNext Indexsoared 152 percent， 146 percent and 178 percent， respectively. However， within a mere 17 days of trading from June 15 to July 8， 2015， the SSE plunged 32 percent， according to data from the China Securities Regulatory Commission （CSRC
3、）. “Such sharp fluctuations reflected that Chinas stock market is still immature， its trading mechanism is incomplete， its market system is deficient and the supervision system is inappropriate， ” said Xiao Gang， Chairman of the CSRC， at the National Securities and Futures Regulatory Work Conference
4、 held by the CSRC in Beijing on January 16. “An excessively fluctuating market is a market of speculation where only a few will gain the most benefit while most people suffer， ” Chinese Vice President Li Yuanchao told Bloomberg News at the World Economic Forums annual meeting held in Davos， Switzerl
5、and， on January 20-23. “The Chinese Government is going to look after the legitimate interests of most of the investors.” “On the one hand， we need to make the stock market more dynamic， but on the other hand we also need to strengthen regulation of the stock market， and we have resolved to do that，
6、 ” Li said in the interview. In the days to come， the CSRC will focus on strengthening supervision by standardizing leverage financing， conducting stricter management on program trading， strengthening the management of transactions in the futures market， and enhancing efficiency. “Some people argue
7、that leverage financing， program trading and going short are also financial tools， and strengthening the supervision of these activities will deprive the market of its free will. Actually， only freedom within the law can be described as freedom. Otherwise， society will be thrown into a mess. The sam
8、e applies to the securities market， ” said Song Qinghui， a financial commentator， in an article published in the Finance and Investment newspaper. Song believes that a prerequisite for stable market operation is the eradication of behavior that is speculative and harmful. To underpin supervision， ef
9、forts should be made to properly handle the relations between the virtual economy and real economy， development and supervision， and innovation and standardization. All of this should be done while simultaneously learning from international experiences， as well as considering national conditions. “T
10、he real economy is the foundation. Partaking in excessive speculation in the virtual economy will eat away the real economy from inside， ” said financial commentator Ye Tan in an article on National Business Daily. Ye noted that top priority should be given to the real economy and the transformation
11、 and upgrading of the manufacturing industry. Supervision is not intervention， and shouldnt be distorted as prejudice or permissiveness toward certain segments of the market. Beyond that， China should not blindly imitate countries like the United States and Britain in pursuing financial innovation，
12、because China and these countries are quite differentiated from each other in terms of their trading circumstances， laws and governance systems. Financial innovation in China should be reflected in risk control， accurate pricing， strict laws and high market efficiency， said Ye. In addition， when lea
13、rning from other countries， national conditions， characteristics and the rules of their domestic markets should be taken into account， claimed Ye. The extensive use of the “circuit breaker”mechanism made us believe that it was also fit for China. However， since Chinas stock market is dominated by re
14、tail investors， the pressure to dump stocks became overwhelming as they panicked when the stock markets in emerging countries plunged， said Fang Xinghai， Vice Chairman of the CSRC， during the World Economic Forums annual meeting. “The regulator has admitted that the circuit breaker is not a suitable mechanism for China， ”said Fang.
