(File photo)

The Shanghai Composite Index opened at 3,975.21, up 288.29 points, before paring its gains to 2.2 percent to close at 3,766.37 in the morning session.

The Shenzhen Component Index slumped 1.7 percent to 12,033.02.

Earlier in the morning, the benchmark Shanghai index surged as much as 7.8 percent at the open, as regulators launched a flurry of measures to stem market plunge.

The central government, securities regulator and financial institutions have launched a joint effort to support the country's plummetingstock market amid fears that a market crash could threaten the country's entire financial system.

Experts warned that further steep market declines without government intervention could lead to chain reactions across the financial markets, including the liquidation of fund and trust products as well as rising bad loans in the banking sector.

The State Council ordered the suspension of new share offerings over the weekend to release locked-up capital to the market. But reviews of new IPO applications will not stop, according to a spokesman for the China Securities Regulatory Commission. The number of new IPOs and the amount of funds to be raised will be drastically reduced, he added.

The People's Bank of China will offer liquidity support in various forms to China Securities Finance Corp, a State-owned company specializing in providing margin loan services to brokerages, to help stabilize thestock market, according to a statement issued by the regulator on Sunday.

Central Huijin Investment said it has invested in exchange-traded funds that track major stock indexes and will continue this operation.

Twenty-eight companies that had gained IPO approval from the regulator will postpone their fundraising due to the current market fluctuations, according to statements from the Shanghai and Shenzhen stock exchanges.

The country's top 21 securities brokerages have pledged to collectively invest 120 billion yuan ($19.3 billion) in exchange-traded funds that track large blue chip stocks.

The firms said they will not sell their holdings as long as the benchmark Shanghai Composite Index is below 4,500 points, while major shareholders said they will buy more shares. The index closed at 3,686.91 on Friday.

While it is uncertain whether a market-stabilization fund by securities firms can help to lift the market out of its nosedive, there is a growing consensus that powerful and effective government measures are necessary to restore investors' confidence in a wildly turbulent market.

The A-share market has been in a free-fall over the past three weeks, with the composite index posting its biggest three-week loss sincethe stock market opened in 1992.