Shanghai shares swung wildly in opening trade Friday after authorities suspended a "circuit breaker" mechanism that this week fuelled a global market rout by twice automatically closing Chinese markets early.
The benchmark Shanghai Composite Index and the Shenzhen Composite Index, which tracks stocks on China's second exchange, both opened more than two per cent higher.
But minutes later they reversed the gains, with the Shanghai index down 0.68 per cent, or 21.15 points, to 3,103.85, and the Shenzhen indicator dropping 1.80 per cent, or 35.22 points, to 1,922.87.
"After the plunges in the previous days, market sentiment has changed," Haitong Securities analyst Zhang Qi told AFP.
"The fickleness of the government policy increased market uncertainty, so some investors may just stay on the sidelines for a while. The future development of the market will depend on the economic fundamentals." Global investors have been alarmed by slowing growth in the world's second-largest economy, which is expected to have expanded in 2015 at its slowest pace in a quarter of a century. Official data on fourth-quarter and annual growth is due to be released later in January.
Friday's swings came after the China Securities Regulatory Commission (CSRC) late Thursday said it was shelving the "circuit breaker", which it had introduced at the beginning of the year.
The mechanism was meant to calm China's notoriously volatile markets - which went into a tailspin in mid-2015 - by automatically suspending trading for 15 minutes if they fell by five per cent in one day, and closing them early if they dropped seven per cent.
But dealers said the system instead heightened selling pressure from traders who wanted to avoid being stuck with shares they did not want to hold.
"After weighing advantages and disadvantages, currently the negative effect is bigger than the positive one," the CSRC said in a statement.
"Therefore, in order to maintain market stability, CSRC has decided to suspend the circuit breaker mechanism." Authorities also set the central rate for the yuan currency marginally higher against the US dollar on Friday, ending eight days of falls.
The People's Bank of China (PBoC) set the daily reference rate at 6.5636 to the greenback, according to the China Foreign Exchange Trade System.
It was up 0.02 per cent from Thursday, when it was set at its lowest level in nearly five years.
China limits the yuan to rising or falling two per cent on either side of the reference rate.
The eight days of falls revived concerns over the currency of the world's biggest trader in goods.
A lower unit should make Chinese exports more competitive on world markets, but at the cost of its imports becoming more expensive in yuan terms.
China has pledged to make the value of the yuan more flexible and market-oriented, and the International Monetary Fund has announced the unit will join its elite reserve currency basket.