Stocks in the mining, paper production and food industries performed relatively better. Shanxi Xishan Coal and Electricity Power pioneered the mining sector in with a 0.92 percent surge.

B shares finished mixed. Of the 109 listed B shares, 91 went down and 10 ended flat. As usual, Anhui Gujing Distillery was again the biggest gainer. Closed-end mutual funds mostly fell in the plunging waves.

Besides a slash in the tax on interest, China is also mulling a series of measures to address the excessive liquidity problem. The national legislature debated a draft bill authorizing the Ministry of Finance (MOF) to sell 1.55 trillion yuan of special treasury bonds to finance the proposed foreign exchange investment company. Analysts believe the issuance of the bonds may reduce liquidity in the market.

The funds raised will be used to buy US$200 billion of the country's total of US$1.2 trillion foreign exchange reserves from the central bank, and invested overseas. The bill, submitted by the State Council to the Standing Committee of NPC, is expected to be approved tomorrow.

New moves were made on the long-awaited financial futures. The China Financial Futures Exchange (CFFEX) yesterday said the China Securities Regulatory Commission has approved the trading rules, a crucial step toward the launch of the mainland's first index futures market.

CFFEX has said there is no specific target date for the launch, but industry insiders have predicted it will be sometime this year.

The approved trading rules cover trading practices, clearing procedures, members' rights and obligations, risk control, information management, hedging operations and the investigation of and penalties for irregular trading.

It is widely believed that the approval of the trading rules has cleared one of the final hurdles in the long preparation process that has tested the patience of many prospective participants, particularly institutional investors who would welcome an effective hedging instrument to minimize risks in an increasingly volatile stock market.

The central bank, on the other side, is concerned about inflationary pressure and is ready to make use of a range of monetary policy tools to curb prices rises, a senior official said yesterday. "The central bank is firm on keeping inflation under control," Yi Gang, assistant governor of the People's Bank of China, told reporters at a fiscal forum in Beijing. "We have many tools at hand," Yi added.

People have been expecting the central bank to raise interest rates or take other tightening measures to rein in rising prices. The central bank will make proper use of the tools to control inflation and keep price levels and economic growth stable, Yi said.

He added that increased asset prices would not be a factor in taking tightening measures. "We are mainly concerned with inflation, especially the consumer price index in China," he said. In the long run, the central bank aims to keep real interest rates positive, Yi said.

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