Abstract
In the first three quarters of 2007, the A-share market underwent three separate stages: the Shanghai Stock Exchange Composite Index opened in 2007 at 2,728.19, continuing its rise from 2006 and accelerating this trend. During this stage, low-priced stock, subject stock, and middle and small-cap stock moved into mainstream. In order to restrain market speculation and bubbles, the Ministry of Finance improved stamp tax for securities transactions; in order to prevent the overheating of economic development and surplus liquidity, the Central Bank raised the banks reserve ratio a total of seven times and interest rate five times, and issued large amounts of central bank bills. The Ministry of Finance also issued 1.55 trillion special treasury bonds, adopted a tight financial policy, applied export taxes on certain products, and adjusted export rebate rate dramatically. Under the combined effect of these factors, the A-share market underwent large fluctuations, with prices rising overall. Keywords: Central Bank; economic development; Ministry of Finance; reserve ratio; securities transactions; Shanghai Stock Exchange; stamp tax; surplus liquidity; treasury bonds
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