The domestic A-share stock index hit new lows on Monday, which should prompt regulators to reflect on the effectiveness of their reform measures.

The benchmark Shanghai index fell by 1.74 percent, sliding to its lowest level since 2009. Commentators attributed the slump to market concerns about worsening profits as the economy shows entrenched signs of a slowdown.

But policymakers should be aware of the fact that facing the same international financial market turbulence and weakening economy, most major stock markets overseas have far outperformed the domestic one this year.

Dropping by 22 percent last year, China's stock index was among the worst performers worldwide and that trend has continued unchanged in the first half of this year. Economic conditions are certainly behind the domestic declines, but policymakers must reflect on whether they have prescribed the right cures for the market.

Chinese regulators have issued a slew of policies in recent months in an attempt to improve market health and restore investor confidence. For example, they have strengthened control of insider trading and improved transparency through publicizing the information of IPO applicants. They have also tackled market manipulation by strengthening investigation procedures and pushing for harsher penalties.

These measures have been well received and deemed as useful steps in building a healthy market in the long run. But the regulators have neglected measures to tackle problems that have a more crucial bearing on the current market.

The stock market is a place where quality companies raise finance to support their sustainable growth while investors gain from such growth through their initial investment. It should never be a cash dispenser for a small number of well-positioned people.

In China's case, some people get their companies listed only to sell their stocks to make personal gain. According to market information provider Wind Info, major shareholders and senior managers of newly listed companies pocketed 22.3 billion yuan ($3.5 billion) through selling the shares they held after the locked-in period.

Regulators seem to be ignoring this as they have failed to stop large numbers of listings even when the market is slumping.

The regulators need to control such wild "pump-and-dump" schemes, if they aim to boost market morale.

(China Daily 07/17/2012 page8)