Authorities closed the once booming over-the-counter stock trading floor in the central city of Wuhan this week.

The crackdown on OTC trading comes amid a sweeping reorganisation of the speculative futures market that will leave just three out of 14 futures exchanges in business.

Regulators are also trying to clean up the troubled trust sector, and last month shut the financially troubled Guangdong International Trust and Investment Corp (GITIC).

GITIC has been placed under the trusteeship of the state-owned Bank of China after running up foreign debts of $2.0 billion.

The tough measures represented a decisive response by Beijing to the Asian economic crisis, and showed that China was determined to avoid contagion from its stricken neighbours, according to financialanalysts.

Meanwhile, authorities on Thursday announced the country's biggest ever bankruptcy -- a sugar mill declared bankruptcy after running up debts of 700 million yuan ($84.3 million).

Some 4,500 workers were laid off from the plant in the depressed province of Heilongjiang in northeast China, the Financial News daily reported.

The Acheng mill was one of China's oldest and biggest sugar refineries. It had partially halted production since 1993 due to mounting losses and poor management, the newspaper said.

A government official in Wuhan said trading in all 19 companies listed on the Wuhan Securities Trading Centre was halted on Monday as part of efforts to purge the city's financial system.

It was believed to be the biggest OTC stock market to be shut after smallers centres in the cities of Yichang and Jinzhou in the central province of Hubei were closed this year, the official said.

A notice issued by Wuhan securities regulators said: "Cleaning and rectifying over-the-counter stock trading isan important measure to rectify financial order, prevent and resolve financial risk."

The notice said some of the 19 listed companies would be merged with a view to a new listing on the formal Shenzhen and Shanghai stock exchanges.

Some would be taken over by listed companies, and others would repurchase their outstanding shares at prices above their issue price, the notice said.

Millions of Chinese have invested their life savings in the once booming OTC market for shares, which took off in the early 1990s but which has collapsed over the past year on widespread reports that authorities planned to close it down.

Regulators fear the speculative market threatens China's financial stability.

Many of the listed companies are so weak they have never paid dividends, and their shares are little more than junk. In addition, analysts said the unregulated market was riddled with insider trading.

At its height last year the nationwide OTC market was capitalised at 60 billion yuan -- 10 per cent of thecombined size of the Shanghai and Shenzhen markets, according to some estimates.

Several dozen Chinese cities now boast OTC trading floors, complete with electronic "big boards" and satellite trading rooms in surrounding towns.

But closing the OTC market risks a social backlash. Many people who invested in the early years of the market were low-paid state workers who are now jobless because of a wave of factory closures.

In a reminder to authorities of the social risks, several hundred investors cheated of their savings by a Beijing futures company marched through Beijing on Wednesday.

It was one of the boldest demonstrations in the Chinese capital since the 1989 Tiananmen Square protests, and followed countless other smaller demonstrations by investors hurt in financial scams across the country.