Urgent measures by the Ministry of Public Security and the China Securities Regulatory Commission (CSRC) to investigate malicious short selling of stocks and indexes amid the recent market slump should be normalized and carried out regularly, given the increasing complexity of financial instruments available and prolonged conspiracy theories in the market.

On Thursday, an investigation team led by a vice minister of public security visited the head office of the CSRC to investigate what it called "malicious short selling of stocks and stock indices."

The team has already found evidence that some trading firms may have manipulated futures trading in the stock market, according to the Xinhua News Agency.

In previous years, few companies have been charged with malicious short-selling practices. Manipulating the stock market is illegal under Chinese law, but the boundary between legal speculative behavior and malicious short selling has become somewhat blurred in recent years as financial instruments in the market have grown increasingly complex, and some of them can not be properly supervised by the outdated legal system.

Rumors about malicious short selling seem to come up nearly every time there is a sharp drop in the stock market, but the speculation has been particularly prolonged this time.

In the past few weeks, the mainland stock market has seen continuous declines, with the benchmark Shanghai Composite Index falling by around 30 percent from June 12 to Wednesday, prior to a rebound on Thursday. Various media reports described the situation as a financial war and attributed the slump to malicious short selling by overseas investors.

But we should not use conspiracy theories to explain stock market slumps, as biased political views make it hard to analyze the issue objectively.

In fact, China is generally opening up its capital market to overseas investors who have abundant experience of speculative trading and Chinese domestic financial institutions are also gradually maturing and offering more diversified financial instruments.

However, mainland stock markets are currently rife with rumors about speculative behavior. This, in combination with more complex transactions than before, calls for clearer boundaries between legal speculative behavior and malicious short selling. Moves that can be seen as hostile, whether by overseas investors or domestic financial institutions, can spread panic in the market and trigger irrational behavior.

Now is an appropriate time for setting clearer rules, and the investigation by the Ministry of Public Security and the CSRC is necessary. Regular probes into short-selling practices should be set up, and the government should disclose the investigation results at fixed times during the year.

As for the ongoing investigation, the Xinhua News Agency said Sunday in its report that the investigation team is currently carrying out further probes, but the report did not give more details.

The investigation should be extended into other areas to detect any illegal acts in the whole financial system, and large State-owned financial institutions should not be exempt from the probes.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn