Guangdong party chief Hu Chunhua has shown flexibility in resolving the crisis at the outspoken Southern Weekly newspaper, following the approach of his predecessor in tackling emergencies, analysts said.

The week-long confrontation between the newspaper's journalists and the provincial propaganda authorities over alterations to the New Year edition was temporarily resolved on Tuesday night as the editorial staff agreed to resume work.

Two sources close to the newspaper's editorial staff said the crisis was resolved as Hu had stepped in to mediate, striking a deal between the newspaper and the propaganda office.

"Hu only offered some basic principles to end the row, which included editors and reporters getting back to work and no punishment would be handed down to journalists. The newspaper will be published as usual tomorrow," said a source.

Hu did not make any public comment about the crisis, but he was involved in talks which also involved provincial propaganda chief Tuo Zhen .

The saga has attracted widespread attention on the mainland and scores of supporters of the newspaper gathered at its headquarters over the past few days. Yesterday, some supporters had several brief scuffles with Communist Party loyalists.

Eoin Treacy's view This journalists strike may have been timed to probe the commitment of the new administration in continuing the long standing policy of curtailing press freedom. The fact that a soft approach has been taken is to be welcomed and may be a signal that a more lenient approach can be expected in future. When we ask the question whether governance is improving or deteriorating this story is a positive outcome and should help to bolster investor confidence that the central government are not about to stoke widespread resistance through heavy handed tactics in the nation's most liberal province. .

As efforts to attract investor interest to the stock market continue to make headlines, the outperformance of the banking sector is particularly noteworthy. The FTSE A600 Banks Index has broken out to new highs when compared to the Shanghai A-Shares following a lengthy period of ranging. At Fullermoney we have long regarded the relative strength of the banking sector to be a lead indicator for the wider market. One of the main reasons for this is because bull markets thrive on liquidity. Banks are liquidity providers and should benefit in such an environment. As the QFII and RQFII programs are expanded, the flow of liquidity into the market is virtually assured.