China’s stock market plunges for second straight day

CCTV News

A woman reacts near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016. (AP Photo/Ng Han Guan) A woman reacts near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016. (AP Photo/Ng Han Guan)

The Chinese stock market suspended trading within a half hour on Thursday — the shortest trading time in its 25-year history — after stocks plunged by 7 percent. The plummet triggered the circuit breaker mechanism, which serves as a preventive measure to avert drastic fluctuations on share prices, and to help bring stability.

China’s securities regulator, the CSRC, said its circuit break mechanism will be suspended beginning Friday.

CCTV America’s Roee Ruttenberg reports.

China's new circuit breaker mechanism triggers again

China's new circuit breaker mechanism triggers again

The Chinese stock market suspended trading within a half hour on Thursday -- the shortest trading time in its 25-year history -- after stocks plunged by 7 percent. The plummet triggered the circuit breaker mechanism, which serves as a preventive measure to avert drastic fluctuations on share prices, and to help bring stability. CCTV America's Roee Ruttenberg reports.

“Currently, negative effects of the mechanism are larger than positive effects. Thus, the China Securities Regulatory Commission decides to suspend the circuit breaker mechanism to maintain market stability,” CSRC spokesman Deng Ke said in a statement.

The circuit breaker system went into effect at 9:42 a.m. on Thursday as China’s Hushen 300 Index (CSI 300) fell 5 percent.

GFX DIGITAL CSI 300 0107

When activated, the circuit breaker system pauses trading for 15 minutes. But if the index then goes up or down by 7 percent, the market closes for the day.

After trading was resumed following the pause, the index dropped by a further 7.21 percent by 10 a.m., which was 0.21 percent lower than the threshold needed to end trading for the day. This triggered the market close.

It was the second time in a week that the circuit breaker system went into effect.


Einar Tangen on China suspending the circuit breaker

CCTV America’s Michelle Makori interviewed affairs commentator Einar Tangen about China suspending the circuit breaker.

Einar Tangen on China suspending the circuit breaker

Einar Tangen on China suspending the circuit breaker

CCTV America's Michelle Makori interviewed affairs commentator Einar Tangen about China suspending the circuit breaker.


Marc Ross on Chinese authorities suspending the market circuit breaker system

CCTV America’s Owen Fairclough interviewed Marc Ross, co-founder and partner of Caracal Strategies about Chinese authorities suspend circuit breaker system.

Marc Ross on Chinese authorities suspending the market circuit breaker system

Marc Ross on Chinese authorities suspending the market circuit breaker system

CCTV America's Owen Fairclough interviewed Marc Ross, co-founder and partner of Caracal Strategies about Chinese authorities suspend circuit breaker system.


The CSI 300 reflects performances of Shanghai and Shenzhen stock markets. The Shanghai Composite Index opened with 3,476 points this morning and was devalued by 7.32 percent. By closing time, its value stood at 3,115 points. Meanwhile, the Shenzhen Index was down by 8.35 percent.

China introduced the mechanism on Jan. 4. It was first used in the United States in October 1989 after a major drop in the stock market.

On January 5, a spokesperson for China’s Securities Regulatory Committee, the security watchdog, said that the mechanism is still “new to China” and the committee would continue to optimize it.

Dan McClory on the loss to China’s stock market

For more on the Chinese stock market and its recent losses, CCTV America was joined by Dan McClory. He’s a managing director at Burnham Securities.

Dan McClory on the loss to China's stock market

Dan McClory on the loss to China's stock market

For more on the Chinese stock market and its recent losses, CCTV America was joined by Dan McClory. He's a managing director at Burnham Securities.


The Chinese authority began to study the circuit breaker mechanism immediately after markets sharply declined in mid-2015. Shanghai lost 30 percent of its value between late June and early July last year.

In an ongoing online survey by Sina.com with nearly 50,000 respondents, 88 percent said that the circuit breaker cannot protect the interests of retail investors. Additionally, 82 percent of respondents said they did not believe in the mechanism’s power to reduce market volatility.

Lao Ai, a financial pundit for Sina.com, said the system should be abolished because it fans investors’ fear for hold-up.

Huang Song, an associate professor specializing in finance at Peking University also believes the system is not working. In a column in the South China Metropolis Daily, he said using circuit breaker could worsen the volatility of the Chinese market.

Meanwhile, Dong Dengxin, a securities researcher at Wuhan University of Science and Technology, blamed the media for deteriorating the situation and inciting panic during the January 4 sell-off.

With or without the mechanism, the market is in panic, added Ye Tan, an economic pundit in China, writing for CCTV Mandarin.

“Technical errors can still come up in practice even though the introduction of the mechanism into the market is right in theory,” Ye said.

Story by CCTV News with information by Xinhua.