Top economist calls on Beijing to rescue market
Wu Jinglian, a leading mainland economist who likened stock exchanges to a casino in 2002, called the government to step in and rescue the ailing equity market.
His remarks may prompt the government to take action, analysts said.
The renowned government policy adviser, who helped design the framework of the country's market economy system, told a forum in Shanghai on Tuesday that intervention was necessary to bail out the troubled market.
'It all comes down to what the government will do to eradicate the problems,' the 78-year-old economist said.
Mr Wu said the root of evil in the mainland market was that small investors always got shortchanged by the powerful players.
'When Mr Wu speaks, the whole market listens,' said Orient Securities analyst Mao Nan. 'The question is whether the regulators will buy his idea.'
In January 2002, Mr Wu fired his first salvo at the securities regulators, comparing the market with a casino and urging officials to curb the overly speculative mood.
His remarks led to inquiries that unearthed a series of scandals. Ever since, the market had turned bearish and did not turn around until 2006.
The benchmark Shanghai Composite Index has tumbled 53.4 per cent from its peak in mid-October.
The market now faces a crisis of confidence as investors doubt whether Beijing has the clout to bail it out.
The central government cut the stamp duty on stock trades in April, fuelling a market rally that turned out short-lived because investors believed corporate earnings would not support the share prices.
The China Securities Regulatory Commission was in hot water recently as officials tried but failed to shore up the stock market.
Securities firms, however, believed that many of the stocks were already undervalued and that they should be going up.
'The regulators must let the market forces dictate the market movement,' said Dazhong Insurance fund manager Wu Kan.
'But they need to restore investor confidence first.'
During the forum, Mr Wu also said the government should protect small enterprises by granting them easy credit to fund their expansion.
'They are the cells of the national economy and provide job opportunities,' he said.
'If they resort to underground banks for loans, it will be dangerous because the unreasonably high interest rates will kill them.'