China stock regulator mulls index circuit breaker system

BEIJING -- China securities regulator said Sunday to deepen reforms, improve legal framework and enhance market supervision, by possibly introducing mechanisms such as a stock index circuit breaker system, in a bid to prevent further abnormal fluctuations.

A stock market rout since mid-June, which had chopped the benchmark Shanghai Composite Index by more than 38 percent by Wednesday, exposed many problems, including insufficient regulation and supervision as well as excessive short-term speculations, the China Securities Regulatory Commission (CSRC) responded to queries from Xinhua.

The CSRC said it will study introduction of a stock index circuit breaker system, a point at which trading will be suspended for a period of time in response to substantial drops.

China should make sure that the stock market serves the real economy, promotes the development of institutional investors and implements policies to encourage long-term investment, the CSRC said.

China should learn from developed economies on how to improve the top-level design for the market, the CSRC said.