Sources at Reuters have reported that Xiao Gang, the head of the China Securities Regulatory Commission, has tendered his resignation after failing to prop up the equities market in recent months, most importantly with a 'circuit-breaker' mechanism of his own devising which failed spectacularly this month.

The news agency says that the CSRC has denied the report on a blog, but not formally. Xiao's various interventions in the Shanghai market have come to nothing and the market has dropped 20% since its last recent peak. The point of the 'circuit-breaker' was to shut the market down automatically if it dropped at too fast a rate, which it did. China's CSI index dropped 7.2% on 7th January and trading was halted, but this has been much criticised. Alan Lok of the CFA Institute told WealthBriefing, our sister publication, one day later: "The circuit breaker system could be a boon or a bane. While it could serve as a market safeguard, it is also disruptive to trading activity and can slow down the price discovery process. Therefore, it should only be seen as the last resort to stabilise markets - to minimise the price (side effect) to be paid during market interventions. The circuit breaker mechanism needs to be implemented in a harmonised fashion across exchanges to provide investors with similar expectations and safeguards on whichever venue they trade."

The authorities evidently agree, as the CSRC has now abandoned the mechanism, according to Bloomberg. The news agency also suggests, however, that the Chinese vice president has muddied the waters by promising more state intervention in order to look after the interets of investors.