Benchmark year

The Shanghai Composite Index had a tough year in 2013. The index closed at 2,106 points on Dec 26, a decline of about 7 percent for the year.

The index was down from 2,434 points on Feb 6 to 2,300 points on June 7.

The mid-year credit crunch drove the index to a low of 1,849 points on June 25.

Looking back, the index was at its lowest ever - 325 points - on July 29, 1994.

In terms of valuation, the market is near rock bottom, with a price-earnings ratio of about 11, nearly the same as in 1994.

The low valuation has many investors and analysts feeling that another bull run is near, although it's unlikely to start this year.

In China, liquidity has always been a key factor in driving the market. Past bull runs were all accompanied by credit expansion.

The central bank kept money supply stable last year. M2, the broadest measure of money supply, posted a rise of 14.2 percent at the end of November, slightly above the median 14.1 percent increase expected by economists.

Although the June cash crunch caused some panic, the absence of IPOs helped keep liquidity in existing shares.

In 2014, it's certain that the central bank will continue its drive to deleverage the economy, meaning no easy money.

Internationally, the US Federal Reserve's decision to start tapering its quantitative easing program will likely be felt in the A-share market, as global investors start their rotation back into the developed world.

But analysts believe the impact will be negligible in 2014, because the Fed's initial steps are relatively small and the Chinese economy is still growing fast.

It seems company earnings will be the driving force in 2014. The State Information Center has forecast that public company earnings will be up 14 percent in 2014, or 3 percentage points higher than in 2013.

Banks' earnings will grow about 10 percent, as interest rate liberalization proceeds, whereas non-bank companies will see 18 percent earnings growth in 2014.

Thaw in US

The impact of fraud allegations by short sellers and regulatory investigations in 2011 is still being felt. As recently as 2010, at least 36 Chinese companies went public in the US, representing nearly one-quarter of all new offerings that year. But the bad news in 2011 killed market interest.