Chinese stocks tumbled sharply on Wednesday as investor confidence shattered, leading to share-dumping to prevent further losses.

The benchmark Shanghai Composite Index sank 5.9 percent to finish at 3,507.19 points.

The Shenzhen Component Index slumped 2.94 percent to close at 11,040.89points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, rose 0.51 percent to end at 2,364.05 points.

Combined turnover of the two bourses expanded to 1.1 trillion yuan (176.4 billion U.S. dollars) from 1.08 trillion yuan the previous trading day.

Losers outnumbered winners by 690 to 12 in Shanghai, and by 609 to 146 in Shenzhen. More than 1,000 shares on the two bourses dived by the daily limit of 10 percent.

More than half of the roughly 2,800 companies listed in Shanghai and Shenzhen had suspended trading as of Wednesday to avoid further losses.

All industry groups lost ground, with many aviation manufacturing, medical care, Internet and transportation companies plunging by the daily limit of 10 percent.

With the benchmark Shanghai stock index falling more than 30 percent from June peak, Chinese government has unveiled a raft of supportive measures to prop up the market, but the efforts have done little to halt the declines so far.

On Wednesday, the government said Chinese insurance companies will be able to invest up to 10 percent of their assets in a single "blue chip" stock, up from the previous five percent.

Meanwhile, the state-backed China Securities Finance Co. will "increase" stock purchases of small- and medium-sized companies, with liquidity support from the country's central bank.

Separately, China's state asset regulator ordered the country's centrally administered state-owned enterprises (SOEs) not to sell shares in their listed companies amid "abnormal market volatility".

Northeast Securities attributed the massive sell-off to the sell-off of blue chips as it is the only way to reduce risk exposure due to the suspension of many small caps from trading.

It said the market bubble created by borrowed money as a result of margin trading needs time to deflate and so does the restoration of investors' confidence.