The benchmark Shanghai Composite Index is now 37.7 per cent off the peak set on October 16 last year as investors bet an influx of fresh capital will drain liquidity out of the already weakened market.

Xi Longsheng, a section chief at the CSRC's issuance approval department, told the Shanghai Securities News that the regulator would strictly review refinancing applications and gauge the necessity of the plan before deciding whether to give its approval.

He added that the CSRC would not interfere in corporate refinancing plans, but warned companies not to grab funds from the market.

Mr Xi's warning follows a CSRC statement on February 25 that criticised hefty refinancing plans by listed companies including Ping An Insurance and Shanghai Pudong Development Bank.

Ping An has been in hot water since announcing a multibillion-dollar refinancing package in mid-January, when the market was being battered by monetary tightening and the United States subprime mortgage crisis.

Since then, the Shanghai index has retreated a further 30 per cent as investors rushed to cash out, betting on further declines.

'These refinancing plans have weighed down the indices and the regulator's statement is obviously aimed at bolstering the market,' said Huatai Securities analyst Zhou Lin. 'But the effects will be limited.'

Mr Xi said the CSRC would look into whether the funds were needed and how feasible the projects were when applications were reviewed.

Separately, the CSRC said property companies would not be permitted to buy and reserve land from share offering proceeds, but they would no longer be totally barred from selling shares.