China’s entire equity market was shuttered within half an hour of opening after falling 7 per cent on further currency weakness as government rescue efforts failed to deter the tide of sellers.

China’s stock market meltdown and currency depreciation have spooked international investors in a replay of last summer’s rout that reverberated around the globe. So far this year — just four days — the bluechip CSI 300 index is down 12 per cent.

Newly minted circuit breakers, introduced and first tripped on Monday, kicked in again on Thursday after the CSI 300 fell 7 per cent. Trading was halted for 15 minutes after the index lost 5 per cent, but as stocks continued to fall the full-day closure was triggered.

Investors were rattled by further weakening of the renminbi, said Wang Jun, analyst at China Securities Co in Beijing. “It was a panicked response to the forex market,” he said. “Accelerating exchange-rate depreciation could lead to liquidity problems. Valuations can’t help but take a pounding.”

The renminbi fell to its weakest level in nearly five years on Thursday, with capital outflow pressure still heavy even after more than a year of nearly uninterrupted outflows. The renminbi was 0.6 per cent weaker on Thursday morning at 6.5928 per US dollar after falling by roughly the same amount on Wednesday.

Policymakers appear uncertain about whether to wade back in to buy stocks with state funds or to stand back. On Tuesday, the “national team” of state-owned financial institutions appeared to re-enter the stock market after remaining on the sidelines since late August.

Goldman Sachs estimated in September that the government had spent Rmb1.5tn ($234bn) to support the stock market in July and August, when the main index was down by as much as 45 per cent from its late-June high. The “national team” owned at least 6 per cent of tradable market capitalisation in the Shanghai and Shenzhen exchanges at the end of the third quarter.

On Wednesday, the stock market had clawed back some lost ground after state media said the securities regulator would extend a ban on share sales by large shareholders. After the trading halt on Thursday, the regulator published new permanent rules restricting share purchases by large shareholders, as well as by corporate management and directors.

Starting January 9, large shareholders can sell a maximum of 1 per cent of a company's shares every three months. They also must disclose stake-cutting plans 15 days in advance. The China Securities Regulatory Commission said the new rules should help to stem panic-selling.

Forex traders on Tuesday reported signs that the People’s Bank of China, acting through large state-owned banks, was drawing on its foreign exchange reserves to support the renminbi.

But renminbi’s deline continued on Wednesday, and authorities now appear reluctant to devote further resources to rescuing the stock market. The securities regulator said in August that the government would halt large-scale stock purchases, though it did not rule out occasional intervention.

Thursday’s trading halt will raise fresh doubts about the newly implemented circuit breaker, which came into force only this week but has already been used twice. Critics say the mechanism may be amplifying losses, as investors rush to exit their positions for fear of being trapped in the event of a trading halt.

On WeChat, the widely-used messaging and social network platform, a joke circulated: “Many people ask, ‘What is the circuit breaker mechanism?’ Actually it’s like this: You bring Rmb 3,000 to play mahjong, but you lose it all in half an hour. The game is paused for 15 minutes so you can pop downstairs to the ATM to withdraw another Rmb5,000. You come back and quickly lose that too. Then the winner says, 'Your luck is too bad, let’s just end the game for today’.”