Trading was stopped for a quarter-hour following the stock market dropped by 5%, activating an automatic 15-minute trading suspension under a fresh system created to control unpredictability.
But shares continued to drop, leading regulators to shut the marketplace.
A production survey previously pointed to bad news for the market.
The Caixin/Markit purchasing managers’ index (PMI) fell to 48.2 in December, indicating tenth consecutive month of decreasing factory action in the sector.
A reading below 50 indicates a contraction in the sector, while increase is suggested by anything above 50.
The Shanghai Composite dropped 6.9% to 3,296.66 points before trading was stopped for the day.
Beneath the newest circuit breaker mechanism, a trading suspension would be triggered by moves of 7% from the prior session’s close for the day.