Chinese stock market regulators need to send out more powerful and unambiguous signals to prevent a further deterioration in investor sentiment, given the sharp fluctuations that have come in recent days despite the flurry of efforts aimed at stabilizing the market.

One sign of the anxiety among investors is the rumors circulating that the wild market ride may have been caused partly by malicious short selling of A shares.

So far, there has not been any solid evidence for or against the short-selling speculation, but the rumors about it have added to the jitters among the country's numerous retail investors.

In a statement late on Thursday, China's top securities watchdog said it had decided to open a probe into possible market manipulation, without confirming the short-selling rumors. 

However, instead of getting tangled up in conspiracy theories, what traders should really care about is whether the market can get back to normal.

The benchmark Shanghai Composite Index ended 3.48 percent lower on Thursday, after Wednesday's plunge of more than 5 percent, which almost erased the previous day's rebound.

It could be said that China's stock market is now at a critical turning point. While a correction can be useful in cooling an overheating stock market, a prolonged decline could lead to a damaging loss of confidence.

Such an unfavorable scenario would inevitably be to the detriment of the country's economic reforms, such as the State sector overhaul and the construction of a multi-layered capital market.

The country's stock market plunge back in 2008 - which saw the benchmark gauge slump to below 2,000 points from a historic peak of 6,124 points in October 2007 - showed how badly the market can be affected if investors lose confidence completely.

In 2008, the US saw less market volatility, even though it was more affected by the global financial crisis than China.

At that time, the sharp slide in China's market slowed the transition away from borrowing mainly from banks and toward direct borrowing in the market instead.

There was some good news on Thursday for oil and financial stocks, but it was only enough to ease the overall drop.

The support measures in recent days included an announcement of relaxed margin trading rules late on Wednesday by the top securities watchdog. But the authorities also need to respond to calls for more efficient moves, such as statements by high-level officials encouraging stability in the market. 

There has been speculation that the authorities might announce a cut in stamp duties for stock trading and a suspension of new IPOs.

A temporary suspension of IPOs in particular could help reduce investor anxiety over pressure on liquidity.

Also, more forceful and unambiguous official signals designed to restore confidence during moments of panic should not be seen as excessive intervention in the market. It is actually the responsibility of the government to move swiftly to reassure markets about the future outlook in emergency.

The article was compiled by Global Times reporter Li Qiaoyi based on an interview with Wang Jun, a senior economist at the China Center for International Economic Exchanges (CCIEE), a Beijing-based think tank. bizopinion@globaltimes.com.cn