China suspended stock trading on Monday after weak manufacturing data spooked investors and sent shares plummeting.
The benchmark Shanghai Composite shed 6.9%, while the Shenzhen Composite lost more than 8%.
The trading halt was China’s first-ever use of circuit breakers — a kind of emergency brake — on main exchanges.
Investors were reacting to data that showed tough conditions in the country’s all-important factory sector.
After improving for two months, a survey conducted by Chinese media group Caixin showed that PMI fell to 48.2 in December from 48.6 the previous month. Any number below 50 represents a deceleration in the factory sector.
While the government’s official manufacturing gauge presented a rosier picture, it is heavily weighted toward large enterprises. The Caixin survey taps a smaller sample size and places greater emphasis on smaller firms.
But economists said the new manufacturing data, while disappointing, does not indicate that China is facing a severe or unexpected economic slowdown.
“While today’s unofficial manufacturing PMI hints at some further weakness in the manufacturing sector, other indicators suggest that the economy as a whole held up reasonably well last month,” analysts at Capital Economics said.
In December, regulators announced plans for the circuit breakers in a bid to avoid a repeat of last summer’s crash that sent markets around the world tumbling deep into the red.
Starting Monday, a 5% rise or fall on the CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, triggers a 15 minute trading halt. A move of 7% at any time, or 5% in the 15 minutes before markets close, stops trading for the rest of the day.
Circuit breakers are already used on major markets in the U.S. and elsewhere, and are designed to give investors a chance to calm down.