Chinese regulators have taken a novel approach to prop up the country's slumping stock market by banning major shareholders in many companies from selling shares.
China's $11tn A-shares have fallen this year after A post-pandemic rally, hit by a weak economy, foreign capital outflows and growing nervousness among small investors. The CSI 300 index of the 300 largest stocks in Shanghai and Shenzhen is down 4.1 per cent so far this year. The index had fallen in each of the previous two calendar years.

Chinese regulators have recently taken several steps to prop up the market, including cutting the stamp duty on securities trading and slowing the pace of ipos to help balance supply and demand.

China's securities regulator also rules that controlling shareholders of listed companies that have broken or broken the net, or have not paid cash dividends in the last three years, are not allowed to reduce their shares through the secondary market.

In fact, the new rules affect about half of the more than 5,000 companies listed in Shanghai or Shenzhen, according to Wind, a financial data provider.

The new rules also encourage major shareholders of all listed companies not to reduce their holdings or extend the sale period.

Shareholders of more than 200 listed companies immediately took action, cancelling plans to reduce their holdings, publicly pledging not to reduce their holdings and extending the period of sale restrictions. Dozens of listed companies have also proposed buybacks to support share prices.