China's securities regulator has shifted the focus from market liberalisation to quality of listed firms, and is likely to introduce policies to encourage asset restructurings following its botched plans on margin trading and the secondary technology board. According to two sources, the China Securities Regulatory Commission has decided to go back to basics - improving the fundamentals of public firms - as it seeks to stabilise the volatile market amid the economic downturn. The CSRC has been proceeding with reforms to invigorate the weak market, but the State Council, the mainland's cabinet, called off margin trading plans on worries that it would worsen the bearish sentiment following a record 65.4 per cent fall in the Shanghai benchmark last year. The regulator is still working on details to boost asset revamp deals among the country's more than 1,400 listed firms, sources said. Potential moves include encouraging state-owned parent companies to inject quality assets into their listed arms and more back-door listings to replace the existing loss-makers or lacklustre firms, they added. Those who conclude successful overhaul deals may even be granted tax incentives, analysts said. 'Asset restructuring is a feasible makeshift policy to boost the market for the time being,' said Essence Securities analyst Liu Jun. 'However, it won't be a cure-all because the economy won't turn around overnight.' In efforts to boost the embattled market, CSRC officials in the past year have offered constant verbal support and are mulling measures such as margin lending and short-selling. The market is also expecting initial public offerings to resume after a six-month hiatus, while the CSRC is taking an extremely cautious stance to avoid sharp falls amid a fresh influx of equity. The Shanghai Composite Index has rebounded nearly 25.3 per cent this year, closing at 2,281.087 points on Friday as the monetary loosening unleashed a massive amount of speculative capital on to the market. Agreeing that restructuring deals could bolster some of the companies' earnings and provide a catalyst to the current bull run, analysts said rumours and speculation of similar moves would attract more runaway investments and lead to a boom-to-bust cycle. 'It is not unusual for the regulator to embark on an asset restructuring to underpin the market,' said Wu Kan, a fund manager at Dazhong Insurance. 'The problem is that a policy-driven rally can't be sustained for a long period.' Sources said the CSRC may vet initial public offering applications again when the index hits the 2,400-point level. Investors have been used to Beijing's aboutfaces on market reforms in the past few years, reflecting the deep divide between the different policy-making ministries. In August 2007, the State Administration of Foreign Exchange announced that individuals would be allowed to trade Hong Kong stocks directly under a pilot scheme. The so-called 'through train' programme was put on hold later amid pressure from the CSRC because of concerns about capital outflows.