China's market regulator has pledged to crack down on market manipulation after rumours that foreign short-sellers were behind recent share price plunges.
Chinese markets were among the world's best performers earlier this year, with Shanghai rising more than 150 percent over 12 months in a spectacular borrowing-fuelled bull run until it peaked on June 12.
But it has since lost almost 30 percent of its value, putting it firmly in bear market territory.
The China Securities Regulatory Commission (CSRC) will launch a special task force to investigate market manipulation, it said in a statement late Thursday.
The comments came after accusations on Chinese social media that overseas investors were driving prices down by short-selling mainland stocks -- although analysts say the plunges were triggered by concerns over valuations and restrictions on margin trading.
Margin investors only need to deposit a small proportion of the value of their trade, potentially generating bigger profits but also exposing themselves to bigger losses.
Interventions by authorities including a surprise interest rate cut at the weekend -- the fourth since November -- and relaxing the margin trade rules have failed to arrest the declines.
The market regulator said it will base its investigation on reports of abnormal market movement from the stock market and futures exchanges.
But an editorial in the Global Times, which is affiliated with the Communist Party mouthpiece People's Daily, denied that overseas investors -- who have limited access to the markets -- were capable of manipulating Chinese bourses.
"Foreign capital has only a small part of the Chinese stock market," it said. "Large-scale short selling by foreign investors in the Chinese stock market has not appeared and is an unlikely scenario."
"Not falling for conspiracy theories can help us objectively analyse why there was a stock market slump," it added.
Chinese exchanges' core problem was internal, it said, "as defects in the system enable speculation instead of normal investment to dominate the stock market sometimes".
China's central bank chief Zhou Xiaochuan on Thursday said that the People's Bank of China will "hold the bottom line of not letting a regional financial crisis happen".