As the economy is growing faster than expected, policymakers must make sure the country's volatile stock market does not pose a threat.

Enhanced efforts by the stock market regulator to crack down on illegal activities in the market are more than needed.

The China Securities Regulatory Commission said yesterday that in the first half of this year, it had fined 16 listed companies and two brokerage firms, warned 134 individuals and banned 46 people from entering the stock market.

The message that came right after China's stock market rose to a new record high is fairly clear: Supervision will be tightened as illegal activities increase amid the stock market frenzy.

The benchmark Shanghai Composite Index closed at 4,346 yesterday, higher than its previous all-time peak of 4,336 reached on May 29. The index was 62 percent higher than at the start of the year, following 130 percent growth in 2006.

The resilience of this year's bull run is amazing. Less than two months after the government tripled the tax on share trading to cool speculation, the market hit a record high.

There are many solid reasons behind the ongoing stock rally.

Excess liquidity is one factor that boosts stock prices.

Low "real" interest rates on bank deposits and a lack of investment channels is another reason why more and more people are rushing into the stock market. Besides, better-than-expected corporate profits, particularly, those announced recently, to a large extent, reignited the current run.

However, as the market regulator pointed out, increasingly rampant speculative activities also contributed to the stock market frenzy that is fueling unsustainable bubbles. Such wrongdoings range from illegal information disclosure to insider trading and unauthorized investment consulting business.

An increase in the number of illegal activities seems unavoidable whenever there is a stock boom. This also presents a big test for the market regulator's capacity to protect the interests of public investors. If the stock market is to develop stably, the regulators must continue to boost investors' confidence through transparency and fairness.

It is good to see the securities authorities have focused their attention on punishing those wrongdoers in the market.

Given that the stock market's bull run may be far from ending, the regulators should continue to heighten their vigilance against various possible transgressors.

(China Daily 07/27/2007 page10)