China's stock market regulator has imposed a record fine on one of the country's biggest stockbrokers for misuse of clients' funds, reports in the official press said.

The fine, of 503m yuan ($61m), has been portrayed as a sign of China's determination to crack down on stock market fraud, as part of a wider drive to prepare the financial sector for international competition and maintain double-digit economic growth.

The stock markets are also closely followed by ordinary Chinese - about 50 million households own stocks, and street-side share-trading centres are common in bigger cities.

Zhejiang Securities massaged share prices by buying and selling stocks between different client accounts, thus boosting its own earnings with commission on the illegal trades, an inquiry found.

Warning signal

Some of the firm's branches offered illegal loans to customers to buy shares, reports said.

"The China Securities Regulatory Commission (CSRC) decided to send a warning to Zhejiang Securities, suspend its proprietary business and confiscate its illegal income in addition to fines," said a spokesman for the official Shanghai Securities News.

The CSRC has launched an anti-fraud drive and brought in Laura Cha, ex-deputy chairman of Hong Kong's stock market regulator, to head it.

Tough stance

"We want to bring our requirements for good corporate practice to align more closely with international standards," Mrs Cha said in a speech in April.

Good corporate governance "has not been well developed or understood in our country", she said.

The CSRC found Zhejiang Securities used clients' funds worth 630m yuan ($76.1m) to carry out illegal trades and had earned 42.3m yuan ($5.1m) in illegally inflated profits since the start of 1999.

Mrs Cha is reported to have begun by insisting on the international standard for her own salary level, though she returns the money to her office.

China has agreed to open up share-trading to foreign brokerage firms provided they team up with a local partner.