A move of more far-reaching consequence came in 2004, when the State Council released the so-called "nine-point" guideline. It is committed to improving the quality of listed companies and plugging loopholes of the market, the main causes of investor detachment. Securities regulators soon issued a series of rules to implement the guideline to correct the problematic market.

In 2005, regulators cleansed the brokers market, disqualifying a number of brokerage firms that were embezzling investor funds and were guilty of other irregularities.

The most crucial step to reconstruct the market, none would deny, was the smooth share merger reform.

The reform, once a taboo for small investors, has proved to be a shot in the arm for the market because it has cleared the barriers for a smooth float of all types of shares. "It unifies interests of all investors, easing further reforms of the capital market," said Li Yongsen, professor with the China Youth University for Political Sciences.

The revised Securities Law and Corporate Law, enforced from January 1, 2006, gave the legal back-up for the market boom. A year of boom has ushered in a string of changes, including improved investor sentiment. More than 175,000 people rushed to open stock accounts in a week at the end of 2006.

But "don't be misled by the bustling world of money," warned Wang Zhongming, director of Research Center of the State-owned Assets Supervision and Administration Commission. "We still face many problems."

Weak market mechanisms and poor financing efficiency are factors worrying Wang, but they can be eased out gradually as the market restructures.

What can have a vital impact on the strategic change of the market is the return of some of the 320-plus major domestic companies, which have opted to list overseas, to the A-share market. "China must have its blue-chip market led by about 30 elite companies," said Ding Guorong, chairman of Shenyin and Wanguo Securities.

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