The Chinese stock market ended 2012 on a slight high, with the benchmark Shanghai Composite Index closing with a 3.17 percent tick-up. However, continued recovery will not be possible without real reforms this year.

The market's success in ending the year on a high note is thanks to a strong rally in the last trading days, with the Shanghai index rising more than 15 percent.

But it is too early to tell if the rally results from any systematic improvement in the ailing Chinese market.

After the short-lived glory of the Shanghai index in 2007, it has remained weak since 2008, dropping from a peak of more than 6,100 to as low as 1,664. Since then, the index has fluctuated around the level of 2,000, showing a lack of confidence in the disorderly market.

Aiming to stem the downturn of the market indices, policymakers issued a series of new policies last year.

A new listing rule was introduced, which strengthened the information disclosure requirements for companies planning to finance on the stock market. The market, according to the new rule, will have more say in deciding whether a company is eligible to be listed or not.

Another major move was strengthening the delisting of underperforming companies. Two companies were delisted at the end of the year, sending a strong signal that disqualified companies will no longer be tolerated.

Although the new policies have not been in force long enough to bring about a fundamental change in the market, they have brought hope to investors, many of whom have long been caught in a slough of despond because of the irregular and underperforming market.

The core of the problems afflicting the market is lack of protection for the interests of investors. The media have revealed that some companies cheat to try and get listed so they can grab money from investors, and not all of these companies have received their due punishment.

Market regulators have strengthened the requirement for dividend payments by listed companies to ensure investors get their due returns. But while this is a necessary step, they need to strengthen the supervision and punishment mechanism to ensure listed companies are quality and honest players.

Harsher laws and regulations must be introduced so that investors make losses due to their bad investment decisions, not because listed companies are cheating them out of their money.