Shanghai and Shenzhen stock markets have sky-rocketed for three days
following June 8, with Mainland media and Hong Kong media giving two totally
different explanations. The Mainland media's harmonious chorus shows signs
of the Central government's directive behind the scenes.

On June 6, the China Stock Market Index dropped below the 1,000 point
speculator's psychological support level, showing the lowest record of the
past 8 years. Two days later, on June 8, Shanghai and Shenzhen stock markets
underwent a big change, with the Shanghai A-share composite index rising 84
points, or 8.21%, at the end of the day, ending at 1,115.5 points. This is
the highest growth in a single day since June 24, 2002. A-share turnover
reached 18.7 billion RMB ($US2.25 billion); over 1.5 times the 7.3 billion
RMB (US$.882 million) of June 7.

The reason for the 2002 stock market jump was that the State Council decided
to cease the policy of stock market "state-owned shares reduction," with the
decision setting off a 9.3% rise. Now, nearly three years later, the reasons
for the China stock market's dramatic changes are that information has been
passed around that the People's Bank and China Securities Regulatory
Commission (CSRC) are researching a serious plan to rescue the stock market,
including pumping in 100 billion RMB (US$12 billion) to rescue dealers with
financial problems. Last week the CSRC also announced six rescue actions,
including permission to list companies' stock repurchase; permission to list
markets for purchasing stock funds; encouraging other organizations to enter
the stock market; tax benefits for dividends; establishing investor
protection funds, and approval for commercial banks to set up a fund
management company.

Mainland China media made positive comments about this stock market
bounce-back. Xinhua net published an article named "Long Expected Rain
Arrives on the Stock Market" the second day after the stock market bounced
back. People's Daily online described the news as "On the 8th June, Shanghai
and Shenzhen stock markets had an overall rise; stocks are growing,
investors are chuckling." The People's Daily print version used "How
Shanghai and Shenzhen Stock Markets Bounced Back from a Desperate Situation"
as the name of its article. All of these reports touted the change as great
news.

To the contrary, both of Hong Kong's important financial newspapers gave
negative reports on this bounce-back. Hong Kong Economic Journal and Hong
Kong Economic Times respectively published editorial articles named
"Mainland Stock Markets Have a Lot of Shortcomings; Hong Kong's Position
will be Difficult to Replace" and "Mainland Stock Market Suddenly Changes
from 'Zhu Market' to 'Wen Market'" ('Zhu Market' refers to China's former
prime minister, Zhu Rongji's policy-supported market, and 'Wen Market' means
China's current prime minister, Wen Jiabao's policy-supported market). The
articles mainly pointed out the shortcomings of the Mainland stock market in
that it does not operate according to market economy principles, but instead
operate according to administrative measures. Some analysts even believe
that the bounce-back was just the effect of the Chinese government having
injected funds in the form of a "painkiller" into the market.

Associate Director of Hong Kong Securities Company Ltd Research Department,
Kenny Tang, said, "Actually, the Chinese government's stock rescuing actions
expected by the Mainland stock market are not breaking through policies, it
is just moving capital into the market. It cannot improve the Mainland stock
market's structural problem from the roots, and this stock market
bounce-back cannot last." He also pointed out that investors lack confidence
in the Mainland stock market and too many forged account books have caused a
long-term bear market. Besides that, the Mainland stock market has many
structural problems, including the internal control system of dealers not
being strict enough, not having enough outside supervision, and too many
cases of dealers embezzling customers' money.

In 2001, the Mainland stock market reached a summit on the high tide of the
global hi-tech network, and on June 13 the Shanghai Composite Index reached
an unprecedented 2,242 points. But, after market's end that day, China's
State Council announced their state-owned shares reduction plan, causing
market concern that the circulation of a large volume of state-owned shares
would collapse the market. Since then the Mainland stock market has begun
its four- year-long bear market.

Prior to April 29, 2005, the CSRC brought up the "state-owned shares
reduction" again, and caused the Shanghai Stock Market to drop below 1,000
points. According to the information published by the CSRC, calculated at
the end of trading on May 27, 2005, the negotiable market value of the
Shanghai Stock Market is around 624 billion RMB (US$75 billion), and the
negotiable market value of the Shenzhen Stock Market is around 366 billion
RMB (US$44 billion). The total of the two markets is around 990 billion RMB
($119). Compared with over 1.886 trillion RMB ($US0.22 trillion) in the peak
period of June 2001, it has dropped nearly 896 billion RMB (US$108.25
billion).

According to above information, it is still too early to say whether the
Mainland stock market bounce-back is as the Mainland media have described
it. However, Mainland investors have experienced the market value
disappearance of nearly 1 trillion RMB in the past, so is it so easy for the
media to persuade them that the "long expected rain" has arrived?

http://english.epochtimes.com/news/5-6-17/29584.html
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