Chinese authorities have come to the rescue of the sinking stock market, with state-controlled funds used to purchase equities. The Securities regulator, meanwhile, has issued a halt on major investors from selling shares. 

The government bought local stocks on Tuesday after the CSI 300 Index tumbled 7 percent on Monday causing a trading halt, anonymous sources revealed.

Like Us on Facebook

The China Securities Regulatory Commission also informed stock exchanges that the ban preventing stockholders from selling will remain in effect beyond Jan. 8.

Chinese policy makers are believed to be playing a big role in cushioning the stock market in a bid to fight a selloff that already saw $590 billion go away in what is considered the worst-ever start to a year in the Chinese market. The government's intervention may allay some selling pressure, but it also challenges the authorities' pledge to keep the markets free and independent.

"The market has got some help from state funds and that will support shares in the short term," Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., explained. But Wang cautioned that the market will have to be strong enough to stand on its own without state intervention in the long run.

The sales ban on major holders, which started in July at the onset of the $5 trillion market crash, will remain until a new rule comes into effect that would restrict sales. Listed companies were told to release statements confirming that they will halt sales. Large companies willingly obliged.

Shenzhen-listed Zhejiang Century Huatong Group issued a statement in an exchange filing that it will not trade any shares on the secondary market at least for another year as soon as its previous commitment expires in January. The refrigerator-compressor-giant, Changshu Tianyin Electromechanical Co., also committed, saying its controlling holders would not sell shares over the next nine months.

Investors with over 5 percent of single ownership stocks are also required to adhere to the sale ban. The restriction has, however, attracted the ire of some foreign investors who considered the action as way too far.

Tagschina stock market crash, stock market, China stock market, China Shares Trading Ban