China's benchmark stock index dipped below 1,000 points Monday.

A prevailing pessimism has significantly reduced policymakers' room for manoeuvre, but the tailspin of Chinese stocks still cannot deny the significance of the ongoing reform to address non-tradable State shares.

Instead, it all adds to the urgency of the securities authorities' latest efforts to tackle the overhanging problem of a split share structure.

The composite stock index of the Shanghai Stock Exchange dropped to 998.23 points during Monday's morning session. That brought into reality a long-circulating rumour that had foretold such a scenario. It was once unimaginable to most Chinese shareholders, as the benchmark Shanghai stock index peaked at 2,245 in June 2001.

Now, the benchmark index has hit a new low, the lowest since 1997, although its composition has changed a lot making it more symbolic than substantial in reflecting actual market conditions. Many observers have pointed out that measured by average stock prices, the market was actually at a much lower level than the 1,000 points it stood at nearly eight years ago.

Still, the China Securities Regulatory Commission (CSRC) will be censured for the eye-catching market slump.

Tens of millions of domestic shareholders will understandably direct their fire at the securities watchdog. Falling stock prices over the past four years have bitten deep into the pocket of most shareholders. And the current plunge pushed them to desperately seek a light at the end of tunnel, putting even more pressure on the securities authorities.

On the other hand, the ongoing pilot share-merge plans are so important that the CSRC cannot afford to fail.

To ensure the smooth implementation of these crucial reforms, the CSRC should have focused its endeavours on creating a stable market to allow negotiations between listed companies and public shareholders on an equal footing.

Unfortunately, being slow to check excessive fundraising by some listed companies, the securities watchdog has missed the chance to give the market a strong boost when initiating the new reform.

Worse, the plummeting stock index dealt a heavy blow to public investors' confidence and the enthusiasm to support share-merge reforms.

Under mounting pressure from the market, the securities authorities must resist the temptation of saving the stock index with short-term policy incentives.

There are already many calls for a government-led bail-out. And some of them, like the introduction of a State fund to help stabilize the stock market, may even deserve serious consideration.

However, at a time when the leading stock index fell below 1,000 points, the securities authorities should be wary of rushing into anything.

Otherwise, a short-term stimulus will sort out the stock index for a while but complicate solutions to the underlying problems in the long run.

An afternoon rebound put the Shanghai stock index back above 1,000 points Monday. But that was not the end of the matter.

The more important task for the CSRC is, and will always be, to root out long-term problems to safeguard the sound development of the country's securities market.

To this end, the CSRC should make clear its resolution to press ahead with necessary reforms, even at the cost of a temporarily falling stock index.

Source: China Daily