Rising inflation and fears over what Beijing will do next to rein in surging food and property prices have carried much of the blame for the recent mini-crash in Chinese stocks. But Chinese analysts, officials and market participants say the market is also reacting to what appears to be the government’s most serious campaign in years aimed at tackling rampant insider trading and stock manipulation.

China’s benchmark equity index, while recovering a little on Wednesday, has tumbled more than 9 per cent in less than two weeks. Indeed, share prices have been falling as precipitously as they rose in a bull run that saw the index climb nearly 20 per cent between October 8 and November 11. The slide has coincided with a nationwide campaign, announced last week by the State Council, China’s cabinet, to crack down on the “grim situation” of insider trading.

Mainland China’s markets are notoriously opaque and speculative. Everyone, from small retail investors to top fund managers, appears to trade on tips from contacts who claim to have “inside” information. “If you ask any Chinese investor whether they think a chairman or executive of a company is trading in their own stock, nine out of 10 would expect that to be the case just as they would expect a government official to be taking bribes,” says Fraser Howie, co- author of Red Capitalism and other books on China’s stock markets.