HIGHLIGHTS: After another three to five years of development, a strong cohesive force is expected to take place first in China's macro-economic area, and then in the area of fund and the participation of the market as the mainstay, a "big bull market" that spans a period of five to 10 years will gradually present itself before us!

According to Prof. Li Yining, a noted economist, the emergence of a long-term "bull market" requires three prerequisites: First, a good development trend of the macro-economy, saleable products of listed companies, a continued rise of profits and the resultant promising investment prospects; second, abundant market funds, more potential investors willing to become actual investors; and third, a good corporate management structure of listed companies, rational operational mechanisms, standardized operational methods and relatively high professional qualities of securities business set-ups and effective and timely market supervision and control. It is therefore exclaimed that quotations of the Shanghai and Shenzhen exchanges invariably come and go in haste, with the bull short and the bear long. Except that there emerge several rare "big black horses" annually, the "bull market" is simply like a mirage that is in sight but beyond reach. But a review of international affairs reveals there have been many bull markets, for example, the US stock markets since 1993, but they do not have much to do with us. How far is the "bull market" of China's stock markets away from us? This writer makes a brief analysis in accordance with the three preconditions raised by Professor Li.

Firstly, in terms of the macro-economy, China's macro-economy is expected to follow a favorable course, but it takes time to really achieve this. An authoritative report shows that China's economy is steadily entering a new round of prosperity. In recent years, China has consistently implemented a steady monetary policy and an active financial policy and encouraged folk investment, so as to stimulate domestic demands and boost economic development. Practice has proved that these measures are timely and notably effective. In the past two years, China's GDP has been growing at a rate of over 7 percent, deflation has experienced marked improvement, the consumption price index demonstrates that after a long period of sluggishness, China's consumption market has begun to pick up steadily, the simultaneous rise of trade surplus and favorable balance of international payments shows that the adverse influence of the Southeast Asian financial crisis on China has basically ended. Recovery has begun in some trades, such as the petrochemical industry. But at the same time, we should note that the situation with regard to some deep-seated problems remains grim, these include the irrational economic structure, the imbalance of industrial upgrading and regional development, as well as the task of accomplishing the reform of State-owned enterprises and getting them out of difficulties in three years, and low investment demand, the stockpiling of products of listed companies, the continued expansion of ST and PT ranks and the opportunities and challenges brought about by China's WHO entry, all these have created an unclear investment prospect, therefore the "bull market" will not come right away.

Secondly, in terms of market funds, in recent years, especially since last years, the management department has taken great pains to adopt a series of policies for invigorating the stock market, these include lifting prohibition and allowing three categories of enterprises to enter the market, introducing a contingent of strategic investors; fostering organizational investors, organizing securities investment funds; approving of increased investments and expanded shares by qualified stock-brokers, allowing the indirect entry of insurance funds, permitting stock-brokers to enter inter-bank trade markets and carry out bonds transaction business, allowing stock-brokers to issue bonds to raise funds and develop stock mortgage finance, as well as improving the stock-issuing method in the first-class stock market. In addition, the tax administration has begun levying interest on personal savings deposits and reduced interest for seven times. Preparations are being made to organize Sino-foreign cooperative investment funds and open funds and even the development of index futures and bond futures. The fact that the management department has offered and is prepared to offer so many active measures within so short a period of time to develop the stock market undoubtedly will bring continuous and potential incremental funds for the stock market, thereby enormously increasing the effective demand of the stock market, the influx of these incremental funds into the market will undoubtedly accelerate an early arrival of the "bull market". However, this is only one aspect of the problem, a fairly large capacity-expansion pressure thus far still exists in the development of China's securities market, besides the need to constantly issue new shares, listed companies should issue rationed shares, transfer rationed shares and issue additional new shares, the holding and selling of State shares should be reduced, worker shares and transit rationed shares should be put on sales in the market, under the circumstance wherein market supply and demand are unbalanced, the size of incremental funds is only a relative concept. At present, funds are insufficient, not abundant, thus greatly restrains the early arrival of the "bull market".

Thirdly, in terms of the market mainstay and control mechanisms, along with the promulgation and implementation of the Securities Law, the market is turning gradually from soft restriction to hard restriction, although currently the corporate management structure of most listed companies is not very standardized and rational, the operation of companies still carries a strong color of the planned economy, companies which make excellent achievements in the first year, perform poorly in the second year and suffer losses in the third year are not in the minority. Because it is hard to eradicate the deep-rooted defects of the market, it is indeed impossible to achieve the following in a single day: a standardized operation of stock-brokers and timely and effective market control and the complete elimination of underground deals, but so long as we can ensure that there must be laws to go by, laws must be observed and strictly enforced and law-breakers must be prosecuted, our securities markets can gradually embark on the road to healthy development, thereby creating condition for the arrival of the "bull market".

To sum up, after nine years of cultivation and development, today as mankind enters the new millennium, the framework of the "bull market" of China's securities market has basically taken shape. We believe that after another three to five years of development, a strong cohesive force is expected to take place first in the macro-economic area of China, and then in the areas of funds and the participation of the market as the mainstay, a "bull market" that spans a period of five to 10 years will then gradually present itself before us!