Crackdown on insider trading to be stepped up

China's securities regulator vowed on Friday to intensify the crackdown on insider trading and market manipulation as the government intervention to prevent a market crash appeared to have taken root.

The regulator's pledge came as the equities market has recovered steadily after a sharp 30-percent correction since mid-June.

But there is growing anxiety among investors that the government-backed funds could soon exit their current positions as the market has shown signs of sustained stability.

The benchmark Shanghai Composite Index fell 1.29 percent on Friday, ending a six-day rally after the weaker-than-expected manufacturing data darkened prospects for the Chinese economy for the rest of the year.

Zhang Xiaojun, spokesman for the China Securities Regulatory Commission, told a news conference that enforcing law and regulations will be a key task for the regulator as it cracks down on rampant illegal market activities.

Zhang said market malpractices exist in the margin trading business which allows investors to borrow money to trade stocks and the use of the controversial HOMS system which enabled online lenders to offer clients trading leverage up to 10 times their limit.

The regulator will also pay greater attention to cross-market manipulation in futures trading and the over-the-counter market, he said.

The CSRC investigated 180 cases in the first six months of the year, up 15 percent from the same period in 2014. The regulator froze capital worth 380 million yuan ($61.5 million) involved in illegal market practices and issued fines of 129 million yuan, according to Zhang.

Zhu Guangyao, vice-minister of finance, said on Friday that China is confident on the healthy development of its stock market.

The next major challenge for the government is how the authorities can manage a smooth exit from its latest intervention measures and let the stock market play by its own rules, Zhu said in an article published by the Xinhua News Agency.

To prop up the market, the CSRC has banned major shareholders of listed companies from selling shares for six months.

A total of 456 Shanghai-listed companies have announced plans to boost their stock holdings while 266 of them have purchased stocks worth 24.65 billion yuan since July 1, according to data from the Shanghai Stock Exchange.

But some analysts said that the government may be under increasing pressure to move away from the recent unprecedented market-rescue measures as they could jeopardize the country's credibility to liberalize its capital markets and to continue the market-driven reforms.