China's central bank said on Tuesday it supported sovereign wealth fund Central Huijin Investment increasing its holdings in stock market index funds.

The People's Bank of China would provide re-lending support to Central Huijin Investment, a unit of China Investment Corp, when necessary to maintain the smooth operation of the capital market, it added in a statement.

On Monday, Huijin stepped in to support domestic stocks that had plunged on US tariff woes.

Several Chinese state holding companies - China Chengtong Holdings Group and China Reform Holdings Corp - also vowed to increase share investment to foster stability in markets.

China's stock benchmark dived 7 percent on Monday amid investor worries about the risk of a damaging trade war and a global recession.

Washington last week imposed extra tariffs of 34 percent on China, which then fired back with its own 34 percent levies on US imports.

Chengtong said its investment units would increase holdings in stocks and exchange traded funds (ETFs) to safeguard market stability.

"We are firmly optimistic toward the growth prospects of China's capital markets," the state investment firm said in a statement, vowing to support high-quality growth of Chinese listed companies.

China Reform Holdings Corp, also known as Guoxin, said in a separate statement that an investment unit will increase holdings in tech companies, state firms and ETFs, tapping a relending scheme for share buybacks. Initial investment will be 80 billion yuan.

Another state holding company, China Electronics Technology Group, said it would boost share buybacks in listed units to bolster investor confidence. (Reuters)