On his recent visit to Uzbekistan, Premier Wen Jiabao said the Chinese government would prevent bubbles from forming in the capital market and dramatic fluctuations from harming the stock market.

He said the government is bound to establish a transparent and fair market, in which the interests of businesses and the investors are protected. The soundness of the stock market is crucial to both investors and the prosperity of the national economy. He also said the government will rely only on market-oriented means to achieve this goal.

These were Premier Wen's first public remarks about the stock market since it entered a bullish period in 2005. The timing of his remarks reflects the authorities' concern over possible bubbles in the stock market and the economy.

The prices of property and stocks have risen on the back of years of double-digit economic growth and low inflation pressure, though that changed earlier this year. Many analysts described the price rises as a natural result of economic strength and dismissed concerns of economic bubbles as unnecessary.

However, such opinions are based on an inadequate understanding of the situation.

As a matter of fact, such drastic increases in the prices of tangible and financial assets create significant risks, a situation that has been proven both by historical experience and economic theory.

Fortunately, some people are starting to accept this perspective. The premier's remarks reflect the government's determination to squeeze the bubbles in the property market as well as the stock market and to secure the economy from possible shocks.

Now that the government is determined to deal with the bubbles, the primary task is to make sure the property and stock markets do not tumble when the bubbles break.

This is a challenging mission.

Market turbulence is inevitable if the government relies on administrative means to squeeze the bubbles. But it will also be difficult for the government to use a purely market-oriented policy tool to achieve this goal under the current situation.

After two decades of steady development, our market is now quite mature in many areas, though it is still far from perfect. The market operates according to its own rules, so its power is sometimes unpredictable from an administrative perspective.

Despite these difficulties, Premier Wen and many of his colleagues have said several times that they are prepared to use market-oriented steps to squeeze economic bubbles.

While applauding their firmness, we should also think clearly about "market-oriented means". After all, our country's stock and property markets are not well developed yet, and much of what goes on in both markets abides by rules other than those of a market economy. Given these circumstances, it could be challenging to achieve policy goals with market-oriented means.

An example of how difficult this mission could be is found in the property market.

The rising property prices have been blamed on the shortage of supply. The government has sold more land to developers in an attempt to boost the supply and bring down the price, a textbook way to lower the prices of commodities--balancing supply and demand in the market.

However, this market-oriented policy has not led to the expected outcome.

When property prices did not drop, developers just slowed down their construction projects, which ended up making land even more expensive and their projects more lucrative.

This would probably not happen in a market in which prices perfectly reflect the balance between supply and demand.

That it happened here suggests that our market is influenced by multiple factors that are outside of those normally found in a market economy. A lot of work will have to be done to improve our market system before the government squeezes the property bubble.

Premier Wen also emphasiSed the need to protect investors' interests against the effects of market bubbles. He made a good point when he stressed that the government must insulate investors from turbulence. The State has been trying to do so by alerting investors to investment risks and stepping up the investor education.

At the same time, investors should also be aware that it is never the government's duty to keep the market bullish. Instead, the government protects investors by maintaining the fairness of the market, ensuring the transparency of deals and punishing those who disrupt the market order. High returns will always involve big risks, and experienced investors should always be prepared for normal ups and downs.

The premier's remark was indeed informative. We should now be prepared for that the government would launch a series of moves to squeeze the bubbles and ensure economic prosperity.

The author is a researcher with the Institute of Finance and Banking under Chinese Academy of Social Sciences