Margin trading has been operated normally and risks from share funding have been greatly unleashed, China's stock regulator said in response to a sharp plunge in the stock market on Monday.
Chinese shares continued a dreadful losing streak on Monday with major indices down markedly despite rate cuts from the central bank. The benchmark Shanghai Composite index closed 3.34 percent lower at 4,053.03 points.
Zhang Xiaojun, spokesperson of the China Securities Regulatory Commission (CSRC), said the decline was an adjustment of previous breakneck rally and the market has been de-leveraged with risks down during the fluctuations.
The risks from margin trading was controllable as the outstanding volume on Friday shrank by 4.3 percent to 96.5 billion yuan (nearly 16 billion U.S. dollars) from two weeks ago, and share financing via HOMS system also dropped greatly, Zhang said.
Betting on a strong bull run, some Chinese individual investors borrowed money to purchase shares, which added to concerns on stock bubbles. But the recent two-week volatile performance has kicked out a great number of speculators and cooled the stock fervor.
However, Zhang said an overly rapid retreat will jeopardize the steady and healthy development of the market, which is significant to the economy.
"China will continue to develop a multi-layered capital market as a strategic task and step up its liberalization," Zhang added.
The CSRC will continue to encourage long-term capital influx, nurture institutional investors and initiate Shenzhen-Hong Kong stock link in a proper timing to ensure the sound development of the stock market.
"I hope investors will be both confident and rational, and make contribution to a steady and healthy capital market," Zhang said.
In addition, the CSRC will crack down on insider trading, market manipulation and illicit share financing, Zhang said.