Three major related government organs haven't yet reached a consensus. As Tao Dong pointed out, "The central bank is filled with worries; the China Securities Regulatory Commission (CSRC) still maintains its old supervisory patterns; and the State Assets Supervision and Administration Commission (SASAC) seems to like adding more fuel to the already ballooning stock market."

Tao's words were mostly true. The central bank is the one taking action. Like before, the CSRC gave warnings about the bubble bursting and cracking down on insider trading; and the SASAC is wondering how to make all the non-tradable state-owned stocks tradable, adding greater uncertainty to future stock transactions.

"The government departments must fix upon the same goal and move toward it through concerted efforts," Tao suggested.

The Chinese Government is also reaping impressive gains from the booming stock trade. According to statistics provided by the CSRC, the stamp tax from stock trading in April reached 16.2 billion yuan. The total stamp tax in the first four months-78 trading days-this year exceeded 41.2 billion yuan. Statistics from the central bank show that the stamp tax collected in the first quarter increased by 515.9 percent compared with that a year ago.

However, on May 30, five days after Tao's comments, the Ministry of Finance announced that it would triple the stamp tax on stock trades from 0.1 percent to 0.3 percent-without any warning in advance. The ministry stated this move was intended "to further promote the healthy development of the stock market," without elaborating.

Three times over the previous rate-it cannot be neglected any more. On the same day, the stock market responded quickly as the Shanghai Composite Index plummeted 6.5 percent to 4053 points, down 281 points from May 29's record high. In spite of the sharp drop, the Shanghai Composite Index has risen 49.28 percent so far this year.

Government quandary

People in China are entering the stock market at an unprecedented rate. By the end of April this year, the number of total accounts in the Shanghai and Shenzhen stock exchanges had bulged to 93.9 million, with 6.6 million new accounts opened in April alone, according to statistics provided by the China Securities Depository and Clearing Corp. Ltd. The increasing capital supply in the stock market swelled share prices and continuously drove the benchmark Shanghai Composite Index to record highs.

The large-scale participation of citizens in the stock market has pushed the Chinese Government into an embarrassing conundrum. "If the government policies are too strict, they will become the target of complaint by stock investors, especially small investors who have little awareness of risks," said Guo. On the other hand, Guo stated, if the government loosens control over the stock market and lets it go and if a crisis does occur, small and medium-sized investors will suffer the most. Clearly, a large number of bankrupt people can't contribute to the grand undertaking of "building a harmonious society" promoted by the government.

The May 30 plunge was certainly not what investors wanted. Over 850 of all the 1,452 A-share listed companies reached their lower limit (the value of a share can decrease at most by 10 percent on a single day). Netizens were deeply provoked by the government's actions and were commenting harshly on various websites or their own blogs.

The stock market has already shown signs of cooling down. But Tao Dong still believes there will be another 0.27 percent interest rate hike this year, judging by the country's current economic performance. Coupled with the efforts by various administrative organs, how the market would react at that time is still a mystery.

Clash of Ideas: Liu Jipeng, Professor with China University of Political Science and Law "The package of policies shows that the central bank is very mature in handling financial issues. It follows the economic reform direction of this country." Yi Xianrong, researcher with the Chinese Academy of Social Sciences "The central bank is just showing off its skills…It is very harmful that the interest rate stays at such a low level. Why can't the government make the interest rate more marketized?" Tao Dong, Chief Economist of Credit Suisse First Boston "The (Chinese) stock market is heading into the future in spite of turbulence and blocks. The stock holders are enjoying the stock market feast while swallowing the bitterness." Li Su, Chief Executive Officer of H&J Vanguard Research and Consulting Co. Ltd. "I'm confident that the money supply in the stock market will be very sufficient. If foreign companies are going to set up a stock brokerage firm in China, I bet they won't lose." Li Zhenning, Chairman of Rising Fund Management Co. Ltd. "The 0.27-percent interest rate hike won't influence stock holders' attitude toward the stock market. The market has its own principles and rules. It's meaningless for the government to interfere."