Beijing, Jan 4 (IANS) 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.
China welcome new tariff cuts on imports
Chinese citizens have welcomed a new round of tariff cuts on imported products from Australia and South Korea, the media reported on Monday.
The cuts came into effect on January 1 after the second round of tariff reductions after the free trade agreements were enacted in late December, China Radio International reported.
Under the new arrangement, import duties for Australian infant formula have been lowered to nine percent, from the previous 12 percent.
The taxes for South Korean agricultural products were lowered by 1.3 points.
Local residents in Guangzhou have expressed their support for the move.
“I think it’s great, because now we don’t have to do shopping abroad,” said one resident.
“We have got more choices now, and the prices and commodity costs are going down. It will definitely be better for consumers,” echoed another.
Over 5,500 Australian products, accounting for two-thirds of the country’s total exports to China, are affected by the free trade deal.
Meanwhile, more than 90 percent of the imports from South Korea will enjoy zero tariff within 20 years.
China mulls making retirees pay health insurance
China is considering introduction of medical insurance fees for retirees, a media report said on Monday.
In an article for Seeking the Truth, the official Communist Party’s magazine, Finance Minister Lou Jiwei said the government should look at the option as a way to tackle rising pressure on the national health system.
Unlike most countries, retirees in China are not required to pay health insurance, the China Daily reported.
By the end of 2014, about 283 million Chinese were included in the so-called employee medical insurance programme, according to the ministry of human resources and social security.
The national insurance system currently has a surplus of 673.2 billion yuan ($103 billion), a figure that has continued to rise in recent years, from 495 billion yuan in 2012 and 579 billion in 2013.
Yet experts warn that China’s rapidly ageing society means a deficit will occur if expenditure keeps rising at the current pace.
“In the West, the biggest threat to national health insurance systems is an aging population. But in China, besides that factor, pressure also comes from the fact reimbursement levels need to be increased-and that means retirees need to contribute,” said Lin Shuanglin, director of the China Centre for Public Finance at Peking University.
However, asking pensioners to pay insurance fees will likely face public opposition.
The finance minister’s comments have already been sharply criticised online.