Now to the errors and how to correct them. Probably the biggest mistake of the past decade was the effort starting in the autumn of 2014 to talk up the stock market, supported by editorials in official newspapers and a softly approach to market regulation especially with respect to margin trading. By the middle of last year the Shanghai index had doubled, a rise that was totally divorced from economic fundamentals. Although the mainland stock market has a much smaller impact on the overall economy than in more advanced countries, nonetheless when the inevitable crash came the PR effect was devastating. China is in the east, so when media reports of the day's trading begin, they start with Tokyo, Sydney and Shanghai. The repeated sharp drops in stock prices and the clumsy attempts to prop up the market therefore attract world attention every day. China needs to follow more closely President Xi Jinping's directive and let the market take a decisive role. That means accepting modest price/earnings ratios which create a healthy market. There is nothing to be gained by delay, so authorities should withdraw the special support measures and take the hit. Thereafter let the market find its true level and become a serious arena for solid companies to raise capital.

The next question concerns the exchange rate. By the middle of last year, the authorities had (correctly) concluded that the renminbi was overvalued. They then engineered a sudden devaluation for which the rest of the world was psychologically unprepared. The urgent need here is for more transparency. China should seek IMF assistance in assessing a reasonable value for the renminbi, then move towards that figure using a "crawling peg" methodology. From that point on, let the market determine a fair price. China has joined the majors in the world economy club. It's time to play by the big boys' rules.

The author has lived in Hong Kong since 1972. He was in public service from 1974 to 2008, his last post as head of InvestHK. Holder of a BSc (Econ) London he is now a private consultant and adjunct professor at the Chinese University of Hong Kong.