CSRC, however, has kept its word.

Early this year the stock market was investigated for the illicit use of bank funds for stock speculation and market manipulation, and later there was a campaign against earnings falsification by listed companies.

CSRC chairman Zhou Xiaochuan has promised on various occasions to stamp out irregularities in the ten-year-old market with sweeping and relentless actions.

The inspection department of the CSRC has just increased its number of investigators, including those in nine nationwide branches, to about 200 this year. In spite of this it has been in the limelight more frequently than ever.

A series of scandals, involving several blue-chip stocks, were uncovered as the result of CSRC probes. The climax came during August and September, when more than 40 listed companies were convicted of illegitimate activity, including the well-known Guangxia (Yinchuan) Industry Co., a Shenzhen-listed biochemical firm with an impressive profit record over the years.

The CSRC was acknowledged by the media for quick action in the Guangxia case. It had formally began the probe on August 3, and in a month those found to have violated laws had been arrested. It was confirmed that one of the firm's wholly-owned subsidiaries had made false financial statements.

Chinese Premier Zhu Rongji had said at a press conference in March that the CSRC bears the responsibility to improve supervision over the securities market so as to make a fair, equitable and open market.

"There will be a lot of work but we will do a good job this year in the rectification of listed companies and investment funds, " he stressed.

China's bull stock market witnessed a dramatic turn in June. The composite index on the Shanghai Stock Exchange had been sliding down from 2,245 points on June 14, and hit the lowest 1, 515 points on October 15. And the slump continues.

Regardless of the call for loosening the clampdowns, the CSRC chairman pointed out at a meeting that probes and investigations will go on as part of the regular work of the CSRC.

Regulators should not have a hand in adjusting the market as this will endanger the further development of China's young stock market, he added.

The CSRC set up its inspection subsidiaries in nine major areas early this year. And it is working to improve the cooperation with other regulators, such as the Ministry of Finance, Ministry of Justice, Chinese Institute of Certified Public Accountants and Police.

More rules and regulations were also announced this year by the CSRC. For instance, more than 20 regulations were publicized concerning corporate transparency.

"The government action has resulted in some positive changes," said Qi Liang, general manager of Research and Development Department under China Securities Co., Ltd. "The market appears not to blindly follow big investors and insider information and people are paying more attention to the corporate quality."

"Some people do earn easy money through abnormal trading activities, but this won't last forever as the country is struggling to introduce real market operations," he said.

The clampdown in the securities market is far from an exception while the whole country is rectifying market order. The State Council had listed the financial market, including banks, securities and insurance companies, among major sectors that need enhanced regulation in the next five years.

The CSRC source said that it is preparing to set up another inspection department to look into insider activities and price fixing.

Analysts here regarded this as a significant action. Price rigging has led to high risks in the present stock market and it is difficult for regulators to start probes as the dragnet may expand to brokerage, banks and institutions, the analysts said.

(China Daily December 31,2001)