China's bullish stock market survived a startling "correction," when the benchmark Shanghai Composite Index witnessed a 15-percent drop from May 30 to June 5 this year. Zhao Xiao, professor at the University of Science and Technology Beijing, calls for a major play of market itself, in spite of irrational exuberance.
The capital market now survives and operates beyond traditional accounting and statistical theories, and psychological elements sometimes interfere, triggering irrational highs and lows.
Sudden loss of investor confidence caused a large dive in the stock market in early June. As a matter of fact, this drop started from an adjustment of stamp tax to 0.3 percent from previous 0.1 percent, which dealt a heavy blow to the redhot market. It is not this new regulation that hurt, but the way it was announced, making it sound decisive enough to curb overheated speculation.
The "crisis," if we may call it this, revealed a necessity for the country's economic regulators to learn to change its role. Since excess liquidity emerged, China has entered an era when financial and capital strength play a decisive role in economic activities. It is being greatly challenged by different macro-control measures.
When the manufacturing economy dominated, macro adjustments were confined to simple and less risky methods, such as shutting down some incompetent enterprises when over-investment was felt. Because of independence between different entities, other market players would not be strongly affected. But in an era of financial capital, the market is an integral body, and any collapse of market confidence will have a domino effect on other areas.
Perhaps the regulators only wanted to remind crazed investors of the growing risks amid the bubbling market. It was unexpected that the market would be plunged into panic, with market capitalization worth thousands of millions of yuan vaporizing overnight.
Visible competition prevails in a commodity era. Properties might be robbed, and land might be confiscated by use of force. But this is not the case in the present world, where skillful use of "financial weapons" can instantly destroy enemies with the help of globalized information and financial operation platforms.
Though nuclear terror turns dim, financial wars featuring equal destructions are not imaginary threats. The economic wrestling between Japan and the United States two decades ago is a distant memory, while the Asian Financial Crisis in 1997 is a little fresher in people's minds.
It may be the right time for China's economic regulators to abandon outmoded conventions, since financial risks cannot be avoided or thoroughly uprooted. Also the habitual management concept of a planned economy should be replaced by market-oriented control from a macro perspective. At least it is clear that fluctuations of the stock market today are less likely to be controlled than price control in the days gone by. | 
