China's stock watchdog is speeding up a series of reforms including the introduction of a short-selling system within this year, a senior regulator was quoted as saying yesterday.

China may let investors sell stocks short, a mechanism that allows people to profit even when equities slump, the Shanghai Securities News reported, citing Fan Fuchun, vice chairman of the China Securities Regulatory Commission.

The initiative, first suggested by regulators at least two years ago, has been postponed due to concerns over possible speculation and investors' unfamiliarity with the system.

Under the proposed arrangement, retail investors will be permitted to borrow stocks from brokerages and sell them with an aim to buy them back later at low prices to profit from the difference.

The launch of short selling "will depend on our preparatory work," Fan was quoted as saying by the newspaper. He hoped that the matter will be pushed forward in 2008, the paper said.

Fan made the comments during the ongoing Chinese People's Political Consultative Conference (CPPCC) in Beijing. Fan is a member of the CPPCC, the country's top political advisory body.

Industry analysts suggested the introduction of short selling is expected to boost liquidity and shore up trading, but also warned that any rush to introduce it without a solid regulatory framework may lead to rampant speculation.

"The timing also depends on market conditions," said Luo Kewei, a Guosen Securities Co trader. "If stocks perform poorly, the launch will likely be further delayed to prevent turbulence."