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Last week, the central bank issued a set of policies to prevent the economy from becoming overheated. The three policies include raising the interest rate, raising the required reserve ratio and allowing Renminbi to fluctuate at a larger range. According to Fan Gang, director of the National Economics Research Institute and a member of the Central Bank Monetary Policy Committee, these measures aims to solve the excessive money supply and excessive liquidity problems. In light of the potential risks in the stock market, Fan Gang said that the central bank would not exert direct influence on the stock market, the Securities Times reported.

Faced with the extraordinary bullish stock market, the renowned economist said that Chinese government would no longer do anything to either support or disturb the stock market, since the potential risks in the market should be resolved by the market itself.

The current market has become more mature, so has the government. So people should get rid of their illusions and respect market rules, Fan said.

In any countries, the government adjust its macroeconomic policies based on market operation situation. The government could not get rid of fluctuations in the market. Rather, the government issued policies in order to minimize the negative impacts of market fluctuations or to help economy resume as quickly as possible. So the success of a macroeconomic policy should not be judged by seeing whether or not it had eliminated bubbles. Rather, the success of a macroeconomic policy was judged by seeing whether it had helped reduced fluctuations. So when the market began to show signs of becoming overheated or began to cool down, the government should take measures to reduce the risks resulting from market fluctuation.
 
Editor: Yan