China's economy is booming, but its stock market is down

The government is making the move after heavy falls in the shares of newly-listed firms amid investor criticism of flotations at inflated prices.

They have contributed to Chinese stock markets losing a quarter of their value since the beginning of April.

Analysts say the decision should help to halt a markets slide worsened by China's ongoing power shortage.

The main Shanghai index ended up 1.7% on Tuesday after the announcement.

Inflated floats

The China Securities Regulatory Commission (CSRC) will now review its pricing and rule system for initial public offerings (IPOs).

Under the current rules it is the regulatory body itself which sets the initial listing price, but analysts say companies have abused the system by exaggerating their prospectuses to raise more cash and create an artificially high starting price.

"The current system... does not consider individual corporate quality," said analyst Hu Weitao at Eagle Securities.

The CSRC is moving towards a more market-oriented way of setting an IPO's price. Under the changes, instead of it determining a company's flotation price, prices would mainly be set by institutional investors making bids for the stock on offer - called a book-building process.

Analysts also say Beijing hopes the pause will revive interest in future IPOs as it pushes for state-owned firms to float.

"Regulators were forced to take steps to help the market after share prices plunged," said Chen Huiqin, an analyst at Huatai Securities.

"There's increasingly a threat that nobody will want to buy IPOs any more if this continues."

Mainland Chinese firms have raised 42.77bn yuan ($5.2bn; �2.2bn) through flotations in the first seven months of this year, up 65.5% on 2003, according to the CSRC.