China has relaxed rules on short selling and share lending to increase the supply of securities in its markets.
Fund managers will now be able to lend securities and the range of stocks available for short selling has been increased.
Investors in China have struggled recently to find shares to borrow, despite very high valuations on some companies.
Shanghai and Shenzen stock exchanges said they wanted to encourage institutional investors to lend stocks as margin financing has been growing rapidly but short selling growth has been slowed.
A correction in Chinese stocks, which reached a seven-year high on Friday, is now widely expected.
The number of stocks that investors can short sell will increase by 200 to 1,100.