Judge: State-backed groups spent big on stocks

Officials working for the Shanghai government agencies and state-run companies illegally channeled US$826.6 million into the stock market over the last three years, according to a senior judge at the city's highest court. "This is becoming a major threat to the stability of the market and to investment funds," said Qi Qi, deputy director of the Shanghai High People's Court, quoted in the Financial Times. "Moreover, the volatility of stocks can cause huge losses for public finances." His remarks represent the most authoritative confirmation so far that the stock market, which is up 60% this year following a 130% rise in 2006, has been booming on the back of speculative investments made with public money as well as millions of new individual investors. Fraser Howie, co-author of stock market study Privatizing China, believes undisclosed public investment in equities could be as high as US$125 billion, although he admits that this would be impossible to prove.