Chengdu Xingrong Environment Co. also jumped by the daily limit. China will promote price reform in water, oil, natural gas, electric power and transportation sectors, the Xinhua News Agency reported, citing guidelines on promoting price reforms released by the State Council.

“SOE reform is the catalyst that will ultimately drive this market and indications are that this is certainly ramping up,”

Douglas Morton, head of Asian research at Aviate Global LLP, wrote in a note. The measures will include commodity price reform, consolidation of excess capacity sectors, asset sales and asset injections, as well as mixed ownership, he said.

The Communist Party of China Central Committee will hold a key meeting during Oct. 26-29 to deliberate on an economic and social development plan for China over the next five years, according to Xinhua.

Official data due on Oct. 19 will probably show China’s economy grew 6.8 percent in the third quarter, the slowest pace since March 2009, according to the median estimate of 25 economists in a Bloomberg survey. The government’s growth target for this year is 7 percent.

Eoin Treacy's view

It is a well-known fact that China has built up substantial overcapacity in a wide range of sectors which is contributing to fears the economy is in for a hard landing.  The Chinese administration knows this better than any of us not least because so many senior officials have vested interests. Above all else the Communist Party is interested in holding onto to power and the only way they are going to do that is to continue to deliver on the China Dream Xi Jinping talks about. Rising living standards can be achieved in a number of ways but more affordable housing and greater opportunities in the service sector are two major priorities.

The CSI 300 unwound all of this year’s portion of its advance before finding support near 3000 in August. While China has nothing to do with the ETF pricing failure that caused such consternation on Wall Street on August 24th it experienced a similar panicky sell off. That could well have marked the low for this correction. A reversionary rally is now underway and a sustained move below 3150 would be required to question medium-term upside potential.

The FTSE/Xinhua A600 Banks Index is admittedly influenced much more heavily by government policy but its relative strength is an indication of how committed the administration is to support the market. The index found support in the region of the 2013 peak from August 24th and is now testing the region of the 200-day MA. A clear downward dynamic would be required to question potential for additional higher to lateral ranging.

The Shenzhen B-Shares index which has been a leader throughout the last few years has also found at least near-term support.