China arrests 197 as authorities pin blame for stock market crash on 'online rumours'

The unease sweeping through the Chinese stock market has been bolstered by the revelation that the country's authorities have arrested or questioned 197 people for spreading online rumours leading up to Black Monday that led to more than £60bn wiped off stocks. The calamitous crash that was the worst day's trading in Shanghai and Hong Kong since 2007 cause a ripple effect across worldwide markets threatening another worldwide economic downturn.

China's state broadcaster China Central has also paraded a financial journalist forcing him to "confess" to adding to "great losses" across the country's stock market as it seeks to find culprits for the readjustments in its financial system.

Wang Xiaolu, a journalist with business magazine Caijing, was held after speculating in a story written in July, before the crash, that the securities regulator was planning to remove government funds from the market making it vulnerable to a market crash.

State press agency Xinhua said Wang was held for fabricating and spreading fake information which had "caused panic and disorder at (the) stock market, seriously undermined the market confidence, and inflicted huge losses on the country and investors".

The dip in China's share index followed the fatal explosions in the industrial port of Tianjin that took 147 lives and injured almost 800 people. The Chinese government has developed a series of support measures in an unprecedented attempt to stabilise the market including a crackdown on short-selling of stocks for "malicious" gains when traders sell "ghost" stocks they don't own to falsely deflate the market price.

However, the Financial Times has reported that the Chinese government will now concentrate on exposing and punishing those who can be linked to the crash while it temporarily abandons attempts to shore up its stock index.

In a move to restore confidence to the markets the government has revealed that residents of apartment blocks damaged in the Tianjin warehouse explosions will now be able to sell their homes to a property developer's alliance or have the government renovate them free of charge. State-owned property developers in the northern Chinese city said that they had formed the alliance to buy homes from owners of the buildings. The group includes property giant Vanke, the builder of one of the worst-hit blocks.