China’s stock market trade opened 2016 with a gruesome flashback to the summer slide in equities that prompted palpitations among regulators, a spate of vague accusations about foreign meddling, and a rash of policies including intervention in the €6 trillion share market.

With official economic growth in China still running at just below 7 per cent, the markets are slow to embrace government moves to shift the economy from an export-led one to a consumer and services-led one.

The benchmark Shanghai Composite tumbled over 7.1 per cent on 2016’s first day of trading last Monday, and Chinese stocks halted trading for a second time on Thursday, after a 7 per cent plunge in the CSI300 index triggered a recently introduced “circuit breaker” mechanism, less than half an hour after the Shanghai and Shenzhen bourses starting trading.

After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one. Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit-breaker mechanism,” a statement from the China Securities Regulatory Commission (CSRC) said.

The renewed share suspension in China caused global shares to fall sharply on Thursday, with Wall Street opening more than 1per cent lower and European markets trading 2 per cent down.

So heavy was the impact of the circuit breaker, that the China Securities Regulatory Commission (CSRC) called the whole thing off, at least temporarily.

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

In a sign of how sensitive the global markets are to movements in China, the share suspension in China caused global shares to fall sharply.

China’s woes afflicted other Asian markets too, and news that the North Koreans may or may not have tested a thermonuclear device also blasted sentiment in Asian equities, and beyond.

The terrible start for the rocky markets combines with the worst beginning to the year for the Chinese yuan currency since 1994, on growing concerns that the Chinese economy is weakening further.

There is likely to be fairly heavy debate about the circuit-breaker in coming weeks.

The CSRC told the Xinhua news agency that the circuit-breaker mechanism was designed to contain wild swings in the markets and “had calmed down investors and played a positive role”.

However, the CSRC conceded that the market was new to China and that the market needed time to adapt to it.

“China will constantly improve the mechanism according to its implementation outcomes,” it said on Xinhua.

Fearful of a widescale sell-off by big companies, the CSRC has extended rules, due to expire on January 8, under which large shareholders, ie, those holding 5 per cent or more, cannot sell more than 1 per cent of their holdings in a three-month period.

As you might recall, the CSRC introduced these rules on July 8th to help stabilise mainland Chinese equity markets that lost nearly a third of their value in three weeks.

A number of large state-owned enterprises are making voluntary pledges not to sell shares on the secondary market for a year. A portion of this altruism is no doubt inspired by the way CEOs are under scrutiny right now as part of the government’s anti-corruption campaign.

There has been criticism of the circuit-breakers among market players.

In Hong Kong, where superstition possibly plays more of a role than you might think, brokers are talking about a “black” debut, which could be a poor omen for the year.

Some traders are grumbling about the circuit-breakers, saying getting they trigger too easily, which only encourages people to sell more.

“Clearly, the tight stops of 5 and 7 per cent has the magnet effect as prices gravitate towards the breaker and prompts a stampede that drains market liquidity,” Hong Hao, chief strategist at the investment bank BOCOM International, said in research note.

The prospects for the Chinese economy going forward are looking grim, although the picture is complex because consumption is expected to stay stable as investment falls, and the collapse in oil prices makes it difficult for the yuan to depreciate further.

Goldman Sachs believes the yuan has only limited room for further depreciation because the slump in oil prices will help boost the government’s current-account surplus and offset capital outflows.

In a research note, HSBC described the first week as "rather eventful"

and pointed out how weaker-than-expected manufacturing PMI for December added to already-jittery market sentiment.

HSBC expects growth momentum to soften further in the first quarter of the year, with investment growth weakening and exports staying sluggish, although consumption growth is expected to hold up

“The absence of further policy easing in December was a disappointment,” HSBC’s chief China economist Qu Hongbin and Greater China economist Julia Wang said in a research note.

“Reforms are undoubtedly important to long-term growth; our view is that demand-side policies are likely to prove far more useful and effective at countering China’s growth slowdown and deflation,” they wrote.

“While we expect further progress in financial reforms in interest rates and the exchange rate, as well as more SOE reforms, policy makers should strike a balance between reforms and reflation, as a stable demand environment holds the key to realising the long-term benefits of reforms,” Qu and Wang said.