Trading on the mainland Chinese markets was suspended for the day, after shares plunged more than 7% for the second time this week.
The "circuit breaker" rule, a mechanism introduced to stem volatility in the market, was triggered in the first 30 minutes of trading.
Investors are nervous after the central bank moved to weaken the yuan.
This indicates that Beijing is looking to boost exports as China's economy may be slowing more than expected.
What are China's 'circuit breakers'?
The measures were announced in December after a summer of dramatic market losses - used for the first time time on Monday and again on Thursday
They automatically stop trading in stock markets that drop or appreciate too sharply - a 15 minute break if the CSI 300 Index moves 5% from the market's previous close, or a whole-day halt if it moves 7% or more
Supposedly introduced to limit panic buying and selling - which is more likely in small investor-dominated markets like China's - but critics say they only add to selling pressure the next day
The CSI 300 index, which triggers the trading halt, fell 7.2% to 3,284.74. The index is a collection of blue chips stocks from Shanghai and Shenzhen, and first sparked a 15-minute trading halt after it fell 5%.
The mainland benchmark Shanghai Composite index also fell 7.3% to 3,115.89, while the tech-heavy Shenzhen Composite lost 8.3% before trading was stopped.
After the trading halt, China Securities Regulatory Commission announced that major shareholders could not sell more than 1% of a company's shares within three months as of 9 January.
It comes as a previous six-month ban of stock sales by major shareholders is set to expire on Friday.
Depreciating yuan
Recent moves by Beijing to depreciate the yuan have ignited fears that the world's second largest economy is slowing more than expected and could trigger another wave of competitive currency devaluation in the region.
Bernard Aw, market strategist at trading firm IG, said the negative sentiment was because of the perception that China may further weaken the yuan, and concerns over what that might mean for other economies.
China's central bank set a weaker yuan guidance rate for the eighth day, pushing offshore yuan to 6.5646 per US dollar - which is the lowest level since March 2011.
A weaker yuan makes the cost of exporting goods for Chinese companies cheaper - giving the slowing factory sector a boost.
After disappointing manufacturing data on Monday, the mainland benchmark index plunged 7%, triggering a global equities sell-off.
Hong Kong's Hang Seng index also lost 2.9% to 20,371.62 in morning trade.
Oil supply worries
Meanwhile, Brent crude prices hitting new 11-year lows on oversupply concerns, also weighed on investor's confidence.
Japan's Nikkei 225 index was down 1.8% to 17,867.04, while Australia's S&P/ASX 200 index lost 2% to 5,020 as energy shares weighed on the market.
Shares of Woodside Petroleum were down over 3% as oil prices slid after data showed a surprising build-up of US gasoline stocks, adding to fear of a growing global glut.
Government data that showed Australia recorded its 20th monthly trade deficit in a row on falling commodity prices also dented confidence.
South Korea's Kospi index was lower by 1% to 1,905.88 points as geopolitical tensions rose after North Korea's nuclear test on Wednesday.
(BBC)
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