(Feb 5): China should set up a stocks stabilisation fund as soon as possible to boost market confidence, with an aim to get its size to 10 trillion yuan (US$1.4 trillion or RM6.68 trillion) or more, according to an academic at a government think tank.

The size of the fund should be around US$300 billion to US$500 billion in the short term, the 21st Century Business Herald reported, citing Liu Yuhui of the Chinese Academy of Social Sciences. It should then be increased based on the value of the country’s capital market, Liu told the paper in an interview.

Chinese authorities are considering a package of measures to stabilise the slumping stock market, people familiar with the matter told Bloomberg News last month. Policy makers are seeking to mobilise about two trillion yuan, mainly from the offshore accounts of Chinese state-owned enterprises, they added.

China’s stock selloff deepened last week, with a key index falling to a five-year low. The CSI 300 Index benchmark gauge tumbled 6.3% in January, a record sixth straight month of losses.

The stock market has undoubtedly shown liquidity pressure in the short term, Liu said, speaking to the paper in his capacity as a director of another think tank known as China Chief Economists Forum.

Much of the buying power comes from the “national team” to maintain stability, he added, using a term that describes the state-related bodies that Chinese authorities lean on to buy stocks during times of turbulence.

The stabilisation fund can act as a transparent system which is different from the intervention by the national team, Liu said.