The cost of bearish contracts on the China 50 exchange-traded fund has surged to the highest level versus bullish ones since they started trading in Shanghai six months ago. The so-called skew alsoclimbed to a record for a similar ETF in the U.S., even as government buying drove China's benchmark index to a 10 percent rally in the final two days of last week.

While policy makers are trying to bolster the market before PresidentXi Jinping takes the stage in a World War II victory parade this week, bears argue thatvaluations are too high for the rally to last. Chinese investors have about 5 trillion yuan ($783 billion) of borrowed money riding on stocks, and many of them are looking for a chance to exit, according to Bank of America Corp.