Lighter-touch regulation is what China stock markets need

THE renewed sharp declines in China's stock markets is a sobering reminder that official attempts to prop up share prices can only go so far and attempts by government to be a cheerleader for the stock market can do more harm than good.

On Monday, the Shanghai Composite Index suffered its biggest one-day decline since Feb 27, 2007, plummeting by 8.5 per cent, while the Shenzhen Composite fell 7 per cent. More than 1,500 shares dived by their daily limit, including index components PetroChina, China Unicom and Bank of Communications.

Before hazarding any guesses as to what might be going on and its implications, some perspective is in order.