Trading on the Shanghai and Shenzhen stock markets was ended at 1.28 p.m. (local time) on Monday after shares tumbled seven percent, triggering the new circuit breaker mechanism on the first trading day of 2016.
The early end to trading, the first in the history of China's stock markets, coincided with the launch of the circuit breaker, designed to contain wild swings in the markets, Xinhua reported.
The mechanism follows the Hushen 300 Index, which reflects the performance of both Shanghai and Shenzhen traded stocks.
When the index rises or falls by five percent, the circuit breaker imposes a 15-minute suspension in trading. If the Hushen 300 declines by over 7 percent, trading is terminated for the day.
At 1.13 p.m., trading was suspended for 15 minutes and, immediately on reopening at 1.28 p.m., the index fell a further two percent and trading ceased.
When trading closed, the Shanghai Composite Index was down 6.85 percent, the smaller Shenzhen index down 8.16 percent, and the ChiNext Index, China's NASDAQ-style board of growth enterprises, down 8.21 percent.
The slump is generally being attributed to weaker than expected manufacturing activity in December and a steep fall in the yuan exchange rate.
The Caixin General China Manufacturing Purchasing Managers' Index (PMI) released Monday, edged down to 48.2 in December from 48.6 in November.
The central parity rate of the yuan, weakened by 96 basis points to 6.5032 against the US dollar on Monday, according to the China Foreign Exchange Trading System.
