The rise of the Chinese A-share market is unsustainable without the support of both solid economic fundamentals and substantial reform measures, a leading investment industry figure said at the China Wealth Forum, held on Saturday in the coastal city of Qingdao, Shandong province.

Ha Jiming, chief investment strategist of Goldman Sachs Group Inc's investment management unit in China, said: "Current stock prices are too high and will fall if the government does not take substantial reform measures to change the economic structure and improve economic benefits, rather than trying to stimulate the stock market with policies."

Ha said the Chinese capital market is overvalued, leverage is too high and investors are over-zealous－three factors likely to cause a bubble.

"Although I don't think the recent drop in the stock market suggests a downward trend, violent fluctuations cannot be avoided and a substantial divergence of opinions will occur within the market at current price levels," he said, adding that domestic investors should learn from the past.

Up until July 2007, the rise of Chinese small-cap stocks was higher than that of large-caps, but that was reversed in the summer of that year.

At that time, the majority of people thought even if a stock market bubble did exist, it was just a structural bubble, as blue-chip stocks were generally under-valued, whereas small-cap stocks were very expensive.

When the A-share market reached its highest point in 2007, the average price-earnings ratio was 71. Today, the average P/E ratio is more than 40.

"If history was mirrored, blue-chip stocks would still have the opportunity for further increases.

"But without any significant improvement in corporate profits, the P/E ratio on the A-share market may soon reach the level where the stock market bubble burst in 2007," he said.