It looks like everyone who has money in the Chinese stock market is IPO-phobic. Talk about the imminent ending of the unofficial moratorium on initial public offerings in recent weeks has struck terror in the hearts of many investors. What has irked them even more is that a fairly large number of stocks that obtained a market listing in the past several years have been trading at below their issue prices, resulting in losses to the army of enthusiastic subscribers.

The feeling among many investors of being led down the garden path is further amplified by disclosures that some companies had dressed up their IPO prospectus with false or misleading information. This has led skeptical investors to suspect that the practice of deception was more widespread than was made known to the public.

The problem with IPOs in China has more to do with credibility than a drain on market liquidity. Although IPOs have been suspended for more than seven months, the market has remained in the doldrums, despite the occasional short-lived rallies.