Xia Bin, chief researcher of the Finance Institute of the Development Research Center of the State Council, said at the forum it is in fact not the China-US interest rate discrepancy that attracts foreign investors and their funds into China. It is ultimately the anticipation of higher profitability of Chinese companies in the future, and higher prices of Chinese equities, including stocks and properties that brought the money into the country.

Before the latest adjustment, many feared that the government may adopt another approach - fiscal policies such as taxes, rather than pure monetary tools to diminish bubbles in the stock market, after seeing the slow responses and minor effectiveness the rate hikes have led to.

The experts, although holding opposite opinions over weather the 4,000-point level can be sustained, mostly strongly oppose a direct government intervention in the market, by imposing the "capital gain tax". The tax could be a deadly poison to the Chinese stock market for the time being, analysts say. Instead, improvement in securities legislation and enforcement, strengthened supervision, and more education to investors could do the same deed of cooling the market far less painfully.

The China Securities Regulatory Commission (CSRC) also issued on Sunday a new policy to encourage more Chinese enterprises to go overseas for listing. It will allow overseas stock exchanges to establish representative offices in the country from July 1, hoping to divert some of the mounting capital inflow out of the domestic market.

Also attending the forum, Qi Bin, director of the CSRC's research center, denied an earlier report that CSRC is considering merging the B shares in the Shanghai and Shenzhen bourses with the Hong Kong stock exchange.

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