Conversely, large government-linked stocks have rallied in recent days. Petro China is up almost 20 per cent since the start of July, while ICBC, the world's biggest bank, is up 15 per cent over the same period.

"This is a friends and family bail-out," said one analysts who asked not to be named.

News of more stock suspensions came as China's state media reported that an 80 billion yuan fund was being readied to boost the market.

The reports suggest it will be delivered via the China Securities Finance Corporation, a state backed company which provides capital for margin loans to approved stock brokers.

On Sunday the People's Bank of China, the central bank, said it would provide liquidity to this vehicle, which would be used as a conduit to boost the market.

In addition the China Insurance Regulatory Commission said it would allow "qualified insurers" to double the amount of blue chip stocks they can hold.

The previous limit was 5 per cent of their total portfolio, but on Wednesday this was increased to 10 per cent.


"This will promote the long term, healthy and stable development of capital markets," the insurance regulator said in a statement.

On Monday, it was reported China Life Insurance bought 10 billion yuan ($2.2 billion) worth of stocks via exchanged traded funds, while other insurers bought around 1 billion yuan worth of stocks each.

The increasingly desperate measures being deployed by China's central government come after it failed to deliver a second day of face saving gains across local share markets on Tuesday.

In another erratic day on mainland markets, government buying of large companies continued, as smaller stocks were once again sold off.

The Shanghai Composite Index was down 1.3 per cent, while the Shenzhen Composite Index was off 5.8 per cent.

The technology-heavy ChiNext was 5.7 per cent lower.

"There is a good chance the market rescue efforts are seen to be a failure in a few months' time," said Mark Williams, the chief Chinaeconomist at Capital Economics.

"Our view remains that a market rally cannot run ahead of economic fundamentals indefinitely."


China's central government has rolled out a series of policies to stabilise the Shanghai and Shenzhen markets over the last three weeks, after they lost a quarter of their value amid panic selling and wild fluctuations.

These measures have seen the halting of 28 initial public offerings, allowing the country's sovereign wealth fund to buy local shares, having the central bank provide liquidity for margin lending and forcing the country's main stock brokers to create a 120 billion yuan market stabilisation fund.

On Monday Independent media group Caijing reported the National Social Security Fund had also order its fund managers "not to sell a single share". The state-pension fund had $159 billion of assets at the end of last year, split between bonds and equities.

The Communist Party newspaper, The People's Daily, has warned people not to "lose their minds" and "bury themselves in horror and anxiety" as the "positive measures will take time to produce results.

Since reaching a seven-year high on June 12, the benchmark Shanghai Composite Index has tumbled 27 per cent, but it is still up 82 per cent since June last year.