Prior to the letter, the National Social Security Fund (NSSF) said on November 28 that it would invest more money in the mainland stock markets in line with the government's appeal to maintain stable economic development. At that time, NSSF already had increased its stock holdings in the third quarter. The third-quarter reports of listed companies showed the social security funds had 10.126 billion shares in the third quarter, up 10 percent from the second quarter.

China Central Huijin Investment Co., an investment arm of the government, also increased its holdings in three listed state-owned banks in November. It now holds 70.8 million A shares of China Construction Bank purchased through open market transactions and remains the bank's biggest shareholder. As of November 28, Central Huijin had poured 1.2 billion yuan ($174 million) into the three lenders.

The U.S. stock markets, overshadowed by the financial crisis, were not the worst performing markets in the world, but China's were. Even though the mainland stock markets had lost 70 percent of their value since October 2007, China had been reluctant to bail them out.

"NSSF and Central Huijin are the two major channels of government investment, and their accumulation demonstrates the government's determination in rescuing the mainland stock markets, hence reassuring investors' confidence," said Oriental Securities Co. Ltd. in a research report.

Depreciating Yuan?

The Chinese currency fell for four consecutive days against the U.S. greenback and hit its lowest rate of 6.8870 yuan against the dollar on December 2.

Market transactions pushed the exchange rate down 499 basic points to 6.8848 from 6.8349 against the dollar on December 1, the largest one-day change since China unpegged the yuan from the dollar in July 2005.

Renminbi exchange rate is allowed to fluctuate 0.5 percent daily on either side of the midpoint.

Many were left wondering if the yuan would continue to depreciate after it roared to a high level of about 6.83 yuan against the dollar in the previous two months.

Analysts said the depreciating yuan could help boost China's exports for the time being. But in the long run, "the renminbi has no reason to fall against the U.S. dollar judging by China's economic performance and international balance of payments," said Zhao Qingming, senior analyst at China Construction Bank Co. Ltd., in an interview with Xinhua News Agency. Zhao said he believed the recent currency depreciation was due partly to stock markets plunging in Europe and the United States and significant interest rate cuts in those places.

Food Price Controls

The government cancelled its temporary 10-month food price controls in the wake of subdued inflation, underlining its full commitment to reviving the slowing economy.

The National Development and Reform Commission (NDRC), the nation's top economic planner, enforced a price check mechanism for food products on January 15, fearing that soaring food prices might further push up inflation. The regulation required food manufacturers to report price changes to the NDRC and get its approval before raising prices for grains, vegetable oil, pork, beef, dairy products and eggs.

At that time, the monthly consumer price index (CPI), a main gauge for inflation, grew as high as 8 percent year on year, far surpassing the 3 percent threshold. In response, the government adopted a number of emergency policies to bring down inflation. The CPI grew only 4 percent in October and is expected to show another drop for November.