China Investigates 'Malicious Short-Selling' in Stock Market Plunge

China's police have begun investigating trading firms for manipulating futures trading in the stock market, which experienced a significant plunge in recent weeks.

China's government began investigating "malicious short-selling of stocks and stock indices" on its stock market, Xinhua reported on Sunday.

China's stock market plunge in recent weeks has also led to wealthier investors buying real estate abroad. The markets rose on Thursday and Friday after losing more than a third of their value within weeks, in the case of the Shenzhen exchange. According to the Financial Times, the rebound followed warnings and interventions by the Chinese government.

"The team is currently carrying out further probes. It did not give other details," Xinhua reported.

The stock markets were also apparently fueled by providing cheap credit to small investors, which may have added to the markets' volatility. According to experts, there are few opportunities to continue short-selling, and the investigation appears to be a way to pressure investors to not sell their shares.

"It’s hardly likely on any grand scale. You look at the short selling capacity and there is nothing there to indicate that there is any substantial short selling," Fraser Howie, director of Newedge Financial brokerage, told FT.

China's statistics bureau revised their economic growth estimates down to 6.9 percent for the year on Sunday, one-tenth of a percentile below the expected growth projections.