Shanghai, January 7

China will suspend ‘circuit breakers’, the top securities regulator said, after the trading curbs were again triggered today when share prices tumbled more than seven per cent, halting share trading early for the second time this week.

The mechanism went into force at the beginning of the year to reduce volatility on China’s erratic bourses, which went into a tailspin in mid-2015, sending jitters through world markets, but the China Securities Regulatory Commission (CSRC) acknowledged it was not having the desired effect.

“After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one,” the agency said in a statement. “Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit breaker mechanism.”

The Shanghai and Shenzhen stock exchanges both said in statements that the circuit breaker suspension would come into effect on Friday, implying trade would resume as normal, capping off a volatile week on China’s markets.

The benchmark Shanghai Composite Index closed down 7.04 per cent to 3,125.00 today, while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, tumbled 8.24 per cent to 1,958.09.

Each exchange was open for less than 15 minutes — apparently the shortest trading day in the quarter-century history of China’s modern stock market — before trading curbs put an abrupt end to business as the central bank sold dollars to prop up its currency.

Analysts said Beijing’s introduction of ‘circuit breaker’ this week had proved counter-productive, with investor fears of being unable to sell unwanted stocks outweighing any reassurance over market stability. The falls came amid worries over slowing growth in world’s second-largest economy and biggest trader in goods, which have roiled investors worldwide, and with pressure on its currency from capital outflows.

Today, authorities lowered the yuan’s central rate against the US dollar by 0.51 per cent to 6.5646, the lowest since March 2011.

It was the biggest drop since August when Beijing guided the unit down by nearly five per cent in a week in a surprise devaluation.