China has tightened its financial industry rules as the government tries to halt a deepening sell-off in the world’s second largest economy.

Chinese and Hong Kong stocks have lost nearly $6tn since their peak three years ago, with the China Securities Regulatory Commission implementing new rules to create a fairer market order. The new rules will limit short-selling, a strategy where traders bet on asset value, potentially undermining companies.

China’s Central Securities and Reconstruction Commission (CSRC) has announced further restrictions on securities lending from 18 March, following a suspension of restricted stock lending. The move comes amid concerns about slow economic growth and the property market, which has been a major contributor to China’s economic problems. The move follows the default of Evergrande in 2021.

China’s real estate sector is facing challenges due to “shadow banks” that lend billions to developers. Officials are investigating suspected illegal crimes at Zhongzhi Enterprise Group, which filed for bankruptcy. China’s economy is slowing, with over 5% growth in 2023, falling exports, high youth unemployment, and increased local government debt.