A state-owned financial company plans to rescue China's stock exchange by raising capital to buy Chinese stocks, according to an announcement on Sunday.

CRI reported that the China Securities Finance Company (CSF) will increase its exposure to the China stock index by purchasing more shares. China market index regulators said that CSF is currently raising the required capital with the help of the country's central bank.

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In 2011, China's two market indexes namely, Shanghai and Shenzen, along with the Chinese Securities Depository and Clearing company, founded the CSF.

China's stock index have taken a beating in recent weeks as investors and speculators scramble to unload their shares as prices of Chinese stocks continues to fall. Last week's trade contributed a further 12 percent loss. The Shanghai stock market's total loss now stands at around 30 percent since its peak three weeks ago.

Bloomberg Business has reported that 21 brokerage companies have pledged to do their part by investing some of their net assets in the Chinese stock exchange. The shared capital they promised to invest amounts to around 120 billion Yuan ($19.3 billion).

Aside from them, 25 heads of the country's mutual funds have also pledged to purchase shares from the China stock index and refrain from trading them until after a year.

Bocom International strategist Hao Hang doubts that the brokers' pledge would have any impact on the current free fall trend of China's stock index. He said that the promised amount would not last one hour in the current China index trade.

Last week, China Securities Regulatory Commission announced that it would impose stricter requirements for the approval of initial public offerings (IPO). The commission announced that it will only approve the market entry of no more than ten companies in China's index A shares list every month, according to Finance Asia. Usually 20 or more companies go public every month.

Meanwhile, at least 28 Chinese firms, who have been cleared to go public in the Chinese stock market, have decided to postpone their IPOs indefinitely until the Chinese market index stabilizes.

TagsChina Stock Exchange, china index, shanghai stock market, shanghai index, chinese mutual funds, China Securities Regulatory Commission (CSRC)