HONG KONG — Trading was halted for the day on China's stock market for the second time this week, as stocks plummeted Thursday over concerns about the country's currency and the health of the economy.
Trading stopped after only 29 minutes and didn't reopen, with the main index in Shanghai down 7.3 percent. Other Asian markets slumped as well.
"Obviously it doesn't look good, it doesn't look good at all," said Hao Hong, the chief market strategist at Bank of Communications International, the overseas arm of a big Chinese bank.
It has been a rocky start to the new year, with worries over China shaking the confidence of investors around the world and creating volatility in the market. The big fear is that China's economy is slowing down, crimping global growth.
A downbeat Chinese manufacturing report first sent stocks spiraling Monday, prompting the country's market to close early. It also set off a global rout, with stocks in Europe and the United States getting hit.
Since then, investors have been unnerved.
U.S. stocks tumbled Wednesday, as the value of the Chinese currency sank and another economic report showed signs of trouble. The price of crude oil dropped more than 5 percent, with stockpiles growing and the threat of Chinese demand slipping.
The Chinese currency, the renminbi, continued to be a sore spot Thursday.
The Chinese government, which closely controls the renminbi, has been allowing its value to steadily decline. It is a difficult process to manage, especially as companies and individuals send money out of the country at a rapid rate.
On Thursday morning, China's central bank set the rate for the renminbi at 6.5646 to the dollar, its lowest point in almost six years. When stock trading opened, investors dumped shares, once again shutting down the market.
"People are worried about whether they are using currency depreciation to stimulate growth," said Steven Sun, head of China strategy and Hong Kong and China equity research at HSBC. "At the end of the day the question is, do they have control? Everyone is asking that question."
The currency problems risk setting off a chain reaction.
As the renminbi, also known as the yuan, keeps sliding day after day, traders start to expect ever greater declines. The falling currency can then fuel further stock losses in China.
That, in turn, can ripple through to the global markets. A surprise currency devaluation in August helped prompt a sell-off around the world.
"It's getting into a stage where it is self-fulfilling — the weaker the yuan gets, the more selling there will be," Hong said.
The renminbi will provide a critical test for the Chinese government in the coming months.
In theory, a weaker renminbi addresses two of China's problems. It would make China's exports more competitive in foreign markets, offsetting part of the surge in the country's blue-collar wages over the past decade. And it would make foreign companies, houses and other overseas investments seem more expensive.
The trick is preventing a gradual decline from turning into a rout.
Managing the currency is becoming harder for China. Mainly domestic investors are moving money out of the country before the buying power of their renminbi slides further.
China's own economy has also been steadily slowing, making it a less attractive place to invest. Fourth-quarter growth, which will be reported this month, is expected to be 6.9 percent, although some economists have expressed skepticism about the reliability of the figures.
The clearest indication of investor sentiment about the renminbi lies in the currency's value in unrestricted trading here in Hong Kong. Traders have been selling renminbi in Hong Kong for a significantly lower price than the bottom of the government-authorized trading range in Shanghai.
The falling value of the renminbi in Hong Kong undermines confidence in the mainland currency. It then puts pressure on the central bank to keep pushing down the official trading range.
Taken together, the currency weakness, the economic slowdown and the stock market turmoil could force the government to take action. When stocks sold off last summer, China organized large-scale purchases by government-linked brokerages and investment funds.
Some of those measures, though, may be adding to the current pain.
Under a new rule, trading stops for 15 minutes when losses hit 5 percent, a measure known as a circuit breaker. But the cooling-off period may be intensifying the sell-off.
In each case that the circuit breaker was activated this week, the losses continued once trading resumed, taking stocks down 7 percent and forcing a stop in trading both days. On Thursday, the markets closed just 29 minutes after opening, and trading was allowed for only 14 minutes.
The CSI 300 blue-chip stock index finished down 7.2 percent Thursday. The Shanghai composite index fell 7.3 percent, while Shenzhen plunged 8.3 percent.
Japan's benchmark Nikkei 225 index fell 1.5 percent, and the Hang Seng in Hong Kong shed 2.4 percent.
Erwin Sanft, the head of China strategy at the Sydney-based Macquarie Securities Group, predicted further declines in Chinese stocks, but he said that the fall might not continue for long. "China is quite good at defensive measures," he said.
The options for the government go far beyond the market.
To shore up the economy, China could further reduce interest rates so as to help the real estate market. It could also further increase its already considerable stimulus spending on infrastructure.
While such measures might help in the short run, they would only add to one of China's biggest problems in the long run: a huge overhang of debt that was used to finance poorly judged investments. Many of those investments, like high-speed rail lines built in smaller provincial capitals for political reasons, may struggle to generate enough of an economic return to cover the interest on the money that was borrowed to finance them.
"The more you try to alleviate, the worse it gets in the long term," said Viktor Shvets, the head of Asian strategy at Macquarie.