The company was also found to have sold an unqualified vaccine for the treatment of coughs and colds in infants. The medicine failed a test conducted by the state drug administration.

Trading in the company’s stock will be suspended on Wednesday, and when it restarts on Thursday the company will be categorised as a “special treatment” stock because the company does not expect normal business operations to resume in three months, Changsheng said in an exchange statement after the market closed on Tuesday.

The new status means the daily maximum movement in its share price will be limited to 5 per cent instead of 10 per cent, it said

Mainland Chinese exchanges normally impose special treatment status on companies that have abnormal business operations or financial conditions, or which post losses for two consecutive years.

The fallout also spilled over to stocks of financial institutions. Industrial Securities dropped as much as 5.3 per cent in intraday trading in Shanghai as Changsheng’s historical exchange filings showed two major shareholders had pledged a combined 170.8 million shares to the brokerage for personal loans since April last year. Industrial Securities trimmed losses to close 0.9 per cent lower at 5.28 yuan.

Changsheng vice-chairman Zhang Minghao, son of chairman Gao Junfang, had 160 million shares, or a 17 per cent stake in the company, as collateral with Industrial Securities and another major shareholder, Yu Chenpan, had pledged 10.82 million shares.

Industrial Securities may face having to liquidate Changsheng’s shares, should the stock fall towards a warning level that would trigger a margin call requiring borrowers to add more collateral.