The country's over-reliance on loans from bank, which favor State enterprises over private companies, has unfortunately increased over the past year as the rout of the Chinese stock market has suspended initial public offering.

The domestic stock market is a useful channel for Chinese companies, especially private ones, to raise funds for their expansion and therefore it cannot be allowed to dysfunction any longer, especially because private investment that accounted for 62 percent of the country's total investment in the first five months is cooling off at an alarming pace. In the short term, moderate investment growth is crucial to China's attempt to arrest the ongoing economic slowdown. In the medium and long run, robust investment growth in the private sector will largely determine the speed and success of China's economic transformation to embrace consumption-led and innovation-driven growth.

Besides, as the Chinese economy is set to overcome the daunting challenges of "middle-income trap", a healthy stock market for Chinese people to invest and make profits has become a necessity.

Admittedly, the current regulation and performance of the domestic stock market is far from satisfactory. By causing huge losses to tens of millions of domestic investors, the stock crash last summer has more or less complicated China's progress toward a high-income society.

The increasing concentration of household wealth in the red-hot housing market also highlighted the rising risk of lack of alternative investment channels for Chinese families. It is quite apparent that more investments in the housing market will only make it harder for innovators and manufacturers to survive, let alone thrive.

These domestic reasons are enough for policymakers to launch a comprehensive overhaul of the domestic stock market. The higher demand international institutional investors place for the openness and transparency of the Chinese stock market is just another nudge for deepened reforms to build a healthy stock market in China, a global growth engine that no one can afford to bypass.

The author is a senior writer with China Daily.