On Wednesday, another 500 listed firms said they would stop trading their shares in an effort to insulate themselves from the meltdown.
Around 1,300 firms have halted trading, almost half of China's main shares. IG chief market strategist Chris Weston dubbed the sell-off "Black Wednesday". "For the first time, The China Insurance Regulatory Commission (CIRC) has admitted there is genuine 'panic selling' underway.
"When we see around 90% of the market suspended or falling by their daily limit (while further measures have been taken to limit the influence seemingly exerted by futures traders) you know things are becoming less rational," he said.
'Market stability'
Chinese regulators made a string of pledges on Wednesday to try to ease the "panic sentiment" in the market. The Cabinet agency that oversees China's biggest state-owned companies said it had told them not to sell shares and to buy more "in order to safeguard market stability".
And the CIRC pledged to make more money available to brokerages from its state-backed margin finance firm.
Chinese reaction to government intervention
"It's simply too late," says one user, 'Xingfuchongdianzhan', on social media site Weibo. "It's good that the government is saving the market," says another, 'You Ni Jiu Zhen Hao'.
"This is really robbing Peter to pay Paul," remarks 'A lan'. Meanwhile China's outspoken property tycoon Ren Zhiqiang asks, "Who are they [the government] trying to save?" null Investors in China rely on margin financing from these brokerages to borrow money to buy stocks.
Insurers were also given the go-ahead to invest more in blue chip stocks - with the industry watchdog raising limits from 5% of their total assets up to 10%.The official intervention did little to reassure investors.
The Shanghai Composite closed down 5.9% at 3,507.19, having fallen as much as 8.2% during the session. Hong Kong's Hang Seng index dropped 5.8% to 23,516.56. Markets in the rest of Asia were also lower, with Japan's Nikkei 225 index closing down 3.1% at 19,737.64.
In Australia, shares fell as the price of iron ore - one of its biggest exports - fell almost 6% to a three month low. The benchmark S&P/ASX 200 index closed down 2% at 5,469.53. South Korea's Kospi index fell 1.2% to 2,016.21 ahead of the central bank's decision on interest rates on Thursday.
Why China's stock market is falling
As the old adage goes - the value of your investment can go up as well as down. China's stock markets have lost around 30% of their value since the middle of June. And though they're still at March 2015 levels there're some very worried investors. So what's causing the sell-off?
Government intervention
Have efforts to stop people panicking caused them to panic more? Government measures to make people more confident in the stock market are in full swing. New share offerings have been suspended, brokerages have been ordered to buy shares and the Chinese state is promising to provide sufficient liquidity to keep the markets up.
But still the sell-off continues. So has the urgency of the reaction triggered alarm bells that things may be worse than they seem? As The Economist observes: "Far from saving the market from drowning, the succession of life buoys only pushed it further under water."
Herd mentality
About 80% of investors on the Chinese mainland's stock markets are small retail investors - or so-called mum and dad investors. Investing - and talking about their shares - is a national pastime for millions. And many have admitted that they are driven by what their friends and family are doing.
"Retail traders are by their nature enthused by momentum," says market specialist Chris Weston from IG Markets. "If the market is rallying, they feel like they need to be involved on fear of missing out. That momentum is now headed sharply lower and so they want out."
Profit taking
Some long-term investors are cutting their exposure. Many have made good profits over the long term (the market is up 150% on a year ago) and so as things get rocky, they are getting out. Even those who are sitting on losses, unsure of what to do as the market turns, are losing their nerve and selling.
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