SHANGHAI (REUTERS) - China's securities market regulator has opened an investigation into suspected market manipulation after a slump of more than 20 per cent in Chinese stocks since mid-June.

The China Securities Regulatory Commission (CSRC) had set up a team to look at "clues of illegal manipulation across markets", spokesman Zhang Xiaojun said in comments on the CSRC's official Weibo microblog late on Thursday.

"Cases that meet legal standards will be immediately investigated, seriously cracked down upon according to law, and those suspected of a crime will be resolutely transferred to the police for investigation," he said.

The China Daily newspaper said on Friday the CSRC was probing investors who used stock index futures to short the market.

On Thursday, Shanghai's benchmark composite index fell below 4,000 points for the first time since April - a key support level that analysts had expected Beijing to defend. They had predicted that more conservative investors would start closing out leveraged positions if the index fell below 4,000.

Chinese stock markets doubled in value between November and early June, before the sell-off began on June 12.

Beijing has been struggling since the weekend to find a policy formula that would restore confidence, such as easing monetary policy, encouraging more pension funds to invest in stocks and making some administrative tweaks.

Late on Wednesday, the CSRC relaxed rules on using borrowed money to speculate on stock markets, letting brokerages set their own tolerance level on margin calls and allowing the roll-over of margin lending contracts.