A record $1.1tn (£693bn) worth of funds is locked up for subscription to IPOs, analysts at IG market said. The benchmark Shanghai Composite fell by 6.4% to close at 4,478.36 and dropped more than 13% over the week.
That marked the index's worst weekly decline since 2008. However, in Hong Kong the Hang Seng index bucked the downward trend and rose 0.3% on Friday to close at 26,760.53.
"The China Securities Regulatory Commission was reported to be working on margin trading risk management rules for securities companies, according to 21st Century Business Herald," Bernard Aw, market strategist at IG said.
"This could presage further tightening on margin financing to rein in excessive speculation, as well as reduce the risk of a stock market collapse."
Rest of Asia
Elsewhere in Asia, stock markets were mostly higher as investors appeared to shrug off concerns about Greece following another round of failed talks.
European finance ministers ended their meeting on Thursday without a fresh bailout deal, and have called for an emergency summit next week. In Japan, the Nikkei 225 closed up 0.9% at 20,174.24 while the broader Topix also rose 0.9% to end at 1,631.01.
The Bank of Japan maintained its existing asset purchase programme, and also announced that it would reduce the number of policy meetings from 14 to eight a year.
South Korea's Kospi index rose 0.25% to close at 2,046.96, while in Australia the S&P/ASX 200 climbed 1.3% to end at 5,596.99.
bbc.com
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