Chinese markets fell 7 percent in seven minutes Monday, leading the Chinese government to shut down the stock markets Monday.
The government used a circuit breaker to stop market activity. It was first proposed in September after this past year’s volatile trading.
Trading is suspended if stocks slump by 5 percent and if stocks dip below 7 percent then markets completely shut down. According to William Wong of Hong Kong-based firm Shenwan Hongyuan, “Investors rushed to the door during the level-one stage of the circuit breaker as they fretted the market would go down further,” Bloomberg reports.
Traders engaged in a selling frenzy after Chinese financial media group Caixin released figures indicating China’s manufacturing sector is contracting. December is the fifth consecutive month Chinese manufacturing has contracted. In August, global markets lost $5 trillion after the Chinese government unexpectedly decided to devalue the country’s currency.
The Chinese government’s tight grip on markets has investors spooked. Money manager Luan Shaofei told Bloomberg that, “Investors feared that they wouldn’t be able to sell once the circuit breaker was turned on.”
BusinessInsider reports Chinese stocks on the Shanghai Composite index dipped by 3.38 percent only 45 minutes into the trading day. China’s top stocks which are part of the CSI 300 index tanked 7 percent.
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