"The abnormal fluctuations on the stock exchanges have revealed the immaturity of the Chinese markets, inexperienced traders and a trading system that is imperfect," said Xiao Gang, head of the China Securities Regulatory Commission (CSRC).
"They also exposed shortcomings in the supervision, as well as regulation mechanisms that are inappropriate and ineffective," he said, according to a transcript of a speech given to colleagues that was posted on the CSRC website.
His comments came after fresh losses last week on the Shanghai and Shenzhen markets, which had already shed around 40 percent of their value over several weeks this summer despite government efforts to prop them up, including massive share purchases and attempts to restrain panic-buying.
Several brokers are under investigation, notably on suspicion of insider trading.
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Xiao said "deep lessons" had to be learned from the recent turmoil, with a push to "intensify reforms, reinforce supervision (and) support the development of healthy capital markets" by opening them up.
China's markets remain cut off from the rest of the world due to tight restrictions on capital flows.
Last week, the regulator suspended a new "circuit breaker" mechanism that had fuelled investor panic and a global rout by automatically closing Chinese markets early twice in just four days.