In an experimental move to reform the domestic stock market, China's regulators said last week that it will soon allow investors to short sell stocks and buy on margin, following a recent decision by financial authorities to charge taxes on income from transactions on nontradable shares.

For the past four years, China has been considering margin trading, in which people borrow money from brokerage firms to invest in stocks, and short selling, in which investors borrow stocks from brokers and then sell them with the assumption the stock can be bought back at a lower cost than the price at which they sold short.

These changes, which have been approved by the State Council, will be made on a trial basis by a small number of brokerage firms. The investment moves will be gradually expanded to other securities companies, the China Securities Regulatory Commission said.