Excess liquidity and an overheating stock market have been the bane of policy-makers these past two weeks as they work to contain both phenomenon.

At midnight on May 29, fresh on the heels of insistence that the stamp tax would not be adjusted, the Ministry of Finance announced that the tax would be bumped from 0.1 to 0.3 percent. Before this week, the People's Bank of China had already opted to adjust the "three rates"-- the interest rate, exchange rate, and reserve ratio. At the same time, the China Securities Regulatory Commission (CSRC) has started prosecuting listed companies and senior managers for insider trading and other behavior.

It's a busy start. And now, some are drawing similarities between Japan of the 1980's and China today.

Excess liquidity, an uncontrollable bull market, red-hot investment, skyrocketing real estate prices, swelling debt-- are all reminiscent of Japan twenty years ago. Observers believe that several economic policy-making agencies have recently teamed up precisely to avoid what Japan fell victim to, and are taking seriously the threat that China could, as Japan had, lose ten years of hard work and progress.

As if awakening from a sound sleep, many investors are just realizing that the stamp tax has increased. On May 30, the Shanghai and Shenhen exchanges had increased by six percent-- but by Friday, the Shanghai Index had returned to 4,000 points.

The stamp tax has been adjusted before. On May 12 1997, the stamp tax increased from 0.3 percent to 0.5 percent. In the four months that followed, the market shrank 30 percent. Ma Jun, senior China economist for Deutsche Bank, says that if the stock market defies policy signals and continues its unsustainable speed, the stamp tax could still go up even further.

Intensive re-adjustment policy has been continuing for two weeks. And it's not just the central bank that has made unprecedented moves, the CSRC has released a series of hazard warnings and repeatedly called for responsible investing.

On May 14, Sinoma vice-president Chen Jianliang was fined 200,000 yuan for insider trading, and on the 29th, the CSRC announced fines for Senlingaodong and Yanbian Highway for violating regulation, also stating that they will continue to treat such cases severely.

But these seemingly heavy-handed measures may be as effective as fighting an ocean with fists.