The Chinese Super League will introduce salary caps from next season in an attempt to "curb money football" and support the national team.
China's top-flight will cap foreign players' annual salaries at 3m euros (£2.7m), with domestic players earning a maximum of 5m yuan (£571,000) a year.
Teams who exceed limits can be docked up to 24 points.
Players could also be banned from matches organised by China's football association (CFA).
The CFA said it hoped the move would "curb money football" following many high-value international transfers in recent years and provide an "investment bubble" in the Chinese national team.
"Chinese Super League (CSL) club expenditure is about 10 times higher than South Korea's K-League and three times higher than Japan's J-league. But our national team is lagging far behind," CFA president Chen Xuyuan said.
China are currently ranked 75th in the world, while South Korea are 38th and Japan are 27th.
CSL clubs will be soon only be allowed to spend up to 600m yuan (£68m) per year on salaries, with up to £9m of that on foreign talent.
The caps will come into effect from 1 January, with limits also to be introduced for the second and third tiers of Chinese football.
Brazil forward Hulk confirmed earlier this month he will not renew his Shanghai SIPG contract when it finishes at the end of this year.
Hulk signed for the club for £46.1m in 2016, which was an Asian football record signing at the time. It was surpassed later that year when former Chelsea midfielder Oscar also joined Shanghai SIPG for £60m.
It was reported that Oscar's wages on joining were £400,000 a week, the equivalent of £20.8m a year - almost eight times the new cap.
- Want all the goals and talking points from Sunday's Premier League games? MOTD2 is streaming now