China needs a legal framework to strengthen the supervision over the financial market, the central bank said in a report released on Wednesday.

"Institutional improvement is a priority as China's financial market is far from mature," said the report on development of the country's financial market.

Laws were required as soon as possible to improve transparency on transactions, information disclosure, mergers and acquisitions of listed companies and securities firms, according to the report.

The central bank also called for industry associations of securities, futures, accountants and lawyers and credit rating companies to assist government regulators to tighten market supervision.

The China Securities Regulatory Commission, the country's securities watchdog, said in April that companies in the past had tended to exaggerate profits, but a new trend saw companies trying to manipulate their stock price by disclosing false information, and insider trading.

It cited the case of Hangxiao Steel, a Shanghai-listed construction company that saw its share price soar earlier this year after claims of a huge overseas contract.

The commission announced on April 27 that Hangxiao Steel had violated information disclosure regulations with its overseas contract claim.

The commission has pledged to curb illegal trading and fraud in the stock market.

In February, the State Council approved the China Securities Regulatory Commission to lead a cross-departmental team to crack down on illegal securities business.