China's Shortest Ever Trading Day Rocked the Global Markets

China had its shortest trading day on record on Thursday after it allowed the biggest fall in the yuan in five months — causing sharp drops in the global financial markets. The Shanghai stocks were halted for the second time this week after another brutal currency selloff tripped a newly imposed "circuit breaker," which closes trading.

Stocks plunged worldwide but then recouped some losses after the Shanghai and Shenzhen stock exchanges said the country would suspend the circuit breaker as of Friday. The mechanism is designed to halt free-falling prices by stopping trading if stocks fall by 7 percent.

The People's Bank of China surprised markets by setting the official mid-point rate on the yuan at 6.5646 per dollar, the lowest since March 2011 and, less than half an hour after the opening, Chinese stock markets were suspended for the rest of the day.

The financial markets recovered some ground, however, after China said the circuit breaker itself would be suspended. Wall Street opened more than 1 percent down and European markets were trading at 2 percent lower.

Oil slipped below $33 a barrel to near 12-year lows due before recovering, but oil prices are down about 70 percent since mid-2014. The pan-European FTSEurofirst 300 index closed down 2.3 percent and the euro zone's blue-chip Euro STOXX 50 down 1.7 percent, having fallen more than 3 percent during the session.

Nearly 50 billion pounds were wiped off British blue chip companies. UK mining and energy shares tumbled to their lowest level in more than 11 years, as industrial metal and crude oil prices slumped on concerns that major consumer China's economy is even weaker than anticipated.

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Philip Booth, academic and research director of UK-based free-market think tank the Institute of Economic Affairs, told VICE News that while all middle-income countries experience serious stock market booms and busts on occasions, but "the fact that there has been a boom and bust and trading has been suspended is indicative of certain underlying problems."

Booth said that the Chinese government should allow the market to find its own level and that "the continual interference in the market is part of the reason for the boom." He added that, "loose monetary policy has been at least partly responsible for the rise in equity prices."

Simon Evenett, co-director of the Center for Economic Policy Research's program in international trade and regional economics, told VICE News: "This is a bloodbath for short-term Chinese retail investors, especially if they've bought on margin. For everyone else it much depends on how Beijing reacts and whether that triggers countermeasures abroad."

Evenett noted that a sustained exchange rate depreciation by China won't go unnoticed during a US presidential election year, adding: "The more Beijing resorts to steps branded beggar-thy-neighbor the higher the likelihood of a backlash from abroad."

Meanwhile, US billionaire investor George Soros warned of a global financial crisis while speaking during an economic forum in Sri Lanka.

"China has a major adjustment problem," he said. "I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008."

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