In a bid to sustain a “long-desired” market rally, the Beijing Stock Exchange has implemented a fresh policy that prevents major shareholders of listed companies on its platform from selling stocks, Reuters reported on Monday, citing unnamed persons familiar with the matter.

The Chinese bourse is currently rejecting filings from major shareholders seeking to sell, the Reuters report added. According to Chinese stock market regulations, “major shareholders”—those with a 5% or more stake in a listed company—must make a public filing before they can sell their shares.

The duration of this policy remains uncertain, according to the report, and the move is part of “window guidance”—oral directives—intended to protect the market rally. The fear is that without such guidance, the recent surge “could prompt institutional shareholders to reduce their holdings which could knock the index down again,” a source told Reuters.

The bourse’s benchmark BSE 50 index has seen a robust 46% surge this month, driven by recent measures by authorities such as lowering the required funds in stock accounts for investors, improving trading mechanisms and encouraging mutual funds to participate.

The exchange was established in 2021 to support funding for innovative small companies—known as “little giants”. It struggled initially because of a lack of investor interest, according to Reuters. Now, 232 companies with a total market capitalization of 366 billion yuan ($50 billion) are on the exchange. Apart from this, the Shanghai Stock Exchange and Shenzhen Stock Exchange are the major stock exchanges operating in mainland China.

In hot water: This stringent action comes amid a prolonged stock market slump as China struggles to revive its economy. The CSI 300—the index tracks top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange—declined nearly 10% this year, making it one of the world’s worst performing equity indices of 2023.

In October, Chinese shares hit their lowest levels since before the COVID-19 pandemic, prompting Beijing to implement measures to regain speed in the stock market. This also came in the aftermath of slowing economic growth and liquidity concerns in the property sector in the country. For more context on China’s economic crisis, read this and this.

Additionally, in October, the country also increased restrictions on short-selling activities.

The move echoes the trend of authoritarian measures by the Chinese government to prop up equity prices—including the arrest of an individual for spreading rumours about the stock market’s struggles and directives to economists not to discuss deflation and growth issues. Additionally, the government had halted the publication of unfavourable data, such as youth unemployment amid record joblessness.