© ReutersA man watches a board showing the graphs of stock prices at a brokerage office in Beijing, China, July 6, 2015.
A recent sell-off in China's stock markets is the first major challenge facing the country since the introduction of margin trading, and is believed to have been caused by hostile short-sellers.

In a report on the Chinese news site, an analyst said the sell-off was similar to what took place in Hong Kong in 1997, when the territory's benchmark Hang Seng Index plunged 60% after peaking at 16,673 points.

The steep drop in share prices in Hong Kong in 1997 was caused by financier George Soros, who shorted both the Hong Kong dollar and the Hang Seng Index futures, the analyst said, adding that similar practices were observed in the last two trading sessions in China.

According to the analyst, massive funds entered the futures market, building a short position and leading to declines in the stock markets. The size of the funds and the sophisticated trading methods are beyond the ability of Chinese institutional investors, the analyst said.

In fact, Bill Gross of Janus Capital, a co-founder of global investment firm PIMCO, said in early June that the Shenzhen Stock Exchange's Component Index presented perfect short-selling opportunities.

At the time, the index was at a seven-year high but plummeted 30% on Gross's comments. Morgan Stanley and Credit Suisse have also been bearish on Chinese shares recently.

Several measures introduced or announced by the Chinese government, such as lower interest rates, required reserve ratio cuts, and a plan to allow the investment of pension funds in equities, have failed to prop up the Chinese stock markets.

The Chinese government is expected to introduce new policies to rescue the market, since further a decline will hurt companies' ability to borrow money and will put pressure on the economy.

The China Securities Regulatory Commission reportedly was soliciting proposals from institutions to rescue the market.

There have also been reports of brokerages promising not to force liquidation of shares held by investors facing margin calls.