More than 1,300 shares fell on that day, with 855 companies reaching the lower limit (the value of a share can decrease at most by 10 percent on a single day).

Judging from the experiences of the 17-year history of stamp tax collection in China, a rise usually leads to a stock market slump.

The most typical example occurred on May 10, 1997, when the stamp tax was raised to 0.5 percent, ushering in a two-year-long bear market. On observing the cataclysmic change, the Ministry of Finance reduced the tax step by step in the hope of re-boosting the market. In January 2005, the stamp tax was reduced to 0.1 percent, since when the Chinese stock market began to warm.

"It doesn't mean that the government wants to squash the stock market," said Zuo Xiaolei, Chief Economist with China Galaxy Securities Co. Ltd. Zuo said the hike tested investors' patience and confidence. "Some may give up trading stocks due to the high cost, while others may still focus on the high earnings from stock transactions," Zuo said.

One good sign was that the benchmark index regained 1.4 percent on May 31, though nearly 1,000 shares still lost value.

Experts and economists almost reached a consensus: The bull runs on a bumpy road, but it is manageable.

Sinopec Survived Breathtaking Plunge

During the massive stock drop on May 30, shares of China Petroleum and Chemical Corp. (Sinopec), Asia's largest oil refiner, was one of the few that cheated the slump, rising 4 percent to 13.5 yuan on the same day and soaring another 10 percent the next day.

The magic survival was mainly driven by a new oil field recently discovered by Sinopec. The new reserve is estimated to hold between 140 million and 200 million tons of oil.

Blue Chips: Welcome to China

China is now actively enacting measures to attract international blue chip companies and overseas-listed Chinese concept stocks to be listed on the Chinese stock market.

The Shanghai Stock Exchange (SSE) is considering setting up new trading platforms, such as the "Chinese Stock" Exchange Traded Fund (ETF) and an international board.

"Chinese Stock" ETF, according to Hu Ruyin, head of the research center at the SSE, means to make a joint listing of the Chinese concept stocks in the form of ETF funds in the stock market. Hu said policy restrictions on setting up "Chinese Stock" ETFs have almost been wiped out and the QDII (qualified domestic institutional investor) system is a good example.

If the "Chinese Stock" ETF can be launched successfully, the SSE intends to initiate another ETF, designed for international blue chips like Microsoft and will further encourage those companies to be listed directly on the Chinese mainland bourses.

Caijing magazine reported that HSBC Holdings PLC (HBC) and Hang Seng Bank (HSB) have shown keen interest in the new plan. Hu disclosed that Stephen K. Green, HBC Chairman, suggested HBC be listed on the mainland stock market and shared a detailed listing plan with high-level officials from the SSE, as did HSB.

Currently, many profitable Chinese companies including China Mobile and IC foundry SMIC are listed abroad on overseas stock markets such as the NASDAQ and NewYork Stock Exchange, which are believed to have optimal trading systems and are guided by comprehensive rules and regulations.