The problems became more evident during a market rout in summer. Regulators suspended IPOs in July after the main market index plunged 30 percent from its June 12 peak.

Last week, authorities announced a resumption of IPOs and introduced significant changes to IPO procedures, allowing investors to subscribe without paying into escrow accounts in advance, giving more priority to information disclosure instead of pre-IPO approvals, and simplifying procedures for smaller IPOs.

The moves were viewed as preludes to a change of the current approval-based IPO system to a registration-based one, giving a bigger say to the market while improving regulation.

The reforms were in line with Xi's vision to develop a stock market with "sound financing functions," which will help reduce the funding costs for Chinese companies and prevent economic risks, Li said.

Chinese firms have seen their debt burden soar since the global financial crisis, as an industrial glut and weak trade hurt their profits and slowed the economy.

The ratio of debt owed by non-financial firms to the country's GDP reached 317 percent in 2014, compared with 195 percent in 2007.

A healthier stock market will also boost China's innovation drive, which is at the core of economic upgrades and demands more financing with an appetite for risk, said Lu Qiang, a researcher at Genial Flow Asset Management.

"A lot of innovation-based companies will be formed and then disappear. Their financing cannot rely on banks, which favor big firms with mature operations and steady cash flow," Lu said.

He expects faster reforms of the stock market, including the introduction of a registration-based IPO system and new boards that cater to the financing needs of tech firms and smaller companies.