Shares in China's main stock market lost more than 3 per cent Friday to end the worst week on record down 12 per cent, despite government measures aimed at stabilizing financial markets.

The key Shanghai Composite Index, which tracks shares traded in local and foreign currencies, lost 3.57 per cent to close at 2,000.57 points, while the smaller Shenzhen Component Index also plunged again.

Both markets fell for the fifth consecutive day of trading since a seven-day National Day holiday ended Sunday, losing a total of about 12 per cent this week.

Share trading on Friday was "dampened by weak market confidence amid the global turmoil," the official Xinhua news agency said.

The slump came despite the government trying to buoy the economy by cutting interest rates and scrapping a 5-per-cent individual income tax on savings interest from Thursday.

The securities regulator on Thursday also said listed firms must pay dividends in cash rather than stock, in a move to encourage long-term investment and reduce volatility in the markets.