Investors should stop hoping the government will rescue the stock market with policy interventions, such as the launch of a stabilization fund, according to a prominent government economist.

"Any policy intervention that could benefit one interest group would hurt another, making any policy hard to formulate in China's stock market comprised of so many listed companies and complicated interest groups," said Ba Shusong, a deputy director of the State Council's Development and Research Center.

The benchmark Shanghai Composite Index, which nearly doubled last year, has more than halved from its peak of 6,124 points last October, amid fears of inflation, an influx of fresh shares and high valuations.

"As we learnt from the latest round of correction, from time to time expectations had collapsed that the government would step in," Ba told an investment forum held by HSBC and China Business News in Hangzhou on Sunday. "Policy makers are becoming more rational and market-oriented."

Ba played down recent market speculation that the government will introduce a stabilization fund, which could be used to intervene in the stock market.

The Development and Research Center advises the State Council, or China's cabinet, on economic policy.

Ba said the government's idea is that only a healthy economy could lead to a healthy stock and property market.

"There should not always be expectations that the government will rescue the market. The government knows it has to resolve the pressure and problems in its economic growth. Only with a stable economic development, earnings in listed companies naturally become stable and so does the market expectation," he said.

(Shanghai Daily July 15, 2008)