China has fully suspended the lending of restricted shares on Monday, indicating that regulators are taking serious steps to revive investor confidence, said Wang Jianhui, general manager of the Research and Development Department at Capital Securities.

The China Securities Regulatory Commission (CSRC) on Sunday announced it would suspend lending of restricted stocks to strengthen the supervision of short-selling, a move that took effect on Monday, in the latest measure to stabilize the stock market.

Securities lending is an investment strategy in which investors anticipate a decline in stock prices. They borrow stocks from a brokerage firm and sell them in the current market, with the intention of repurchasing the shares when prices fall and then returning them to the brokerage firm.

In an interview with China Global Television Network on Monday, Wang said the enhancements in the securities lending rules primarily reflect the regulatory objective of establishing a market that is centered around investors.

"The CSRC has just sent a clear and strong message that the authority would do everything to protect the stability of the market. And it won't tolerate anyone to take vicious advantage of the loopholes in the regulations. In the future, market supervision I think would become more tightened up, and investors may need some time to digest and adapt to the new change. Since the policy measure would negatively affect the evaluation of the restricted shares, they might hesitate a little when deciding whether or not to participate in primary market activities," he said.

The new regulation has achieved positive results, with the lending balances of strategic investors down by 40 percent.

"The market reaction seems to be a little more confused and cautious. We can see the industry segment, which is more often involved in the shares lending such as the electronics, electric equipment, or computer and media services, have been hit harder than other segments and they dropped by 3.1 to 4.3 percent," said Wang.

"I think the current priority would be the rebalancing of the supply and demand in the stock market. The development of the stock market depends on the overall economy, and the growth of the market scale should also match that of the economy," he added.