CHINA'S decision to suspend its stock circuit breaker makes sense, but the way it is doing it and the timing don't, said Mohamed El-Erian, the chief economic adviser at Allianz SE.

China realised that it had very tight limits, which did more harm than good, El-Erian said yesterday in an interview with Scarlet Fu on Bloomberg Television.

"They realised this, which is good news. The bad news is they took it off at a very peculiar time and did so without a whole set of compensating measures," said El-Erian, who is also a columnist for Bloomberg View.

The China Securities Regulatory Commission announced the suspension of a new stock circuit breaker that forced local exchanges to shut for the second day this week after shares fell seven per cent in intra-day trading. The move added to worry that policymakers are struggling with how to contain the months-long turmoil in its financial markets.

Fresh concern that China's slowdown will hamper global growth has wiped US$2.5 trillion (RM15.4 trillion) off the value of global equities this year, as the nation's tolerance for a weaker currency is viewed as evidence policymakers are struggling to revive an economy that's the world's biggest user of resources.

United States crude's tumble towards US$30 a barrel heightened fears of disinflation and fuelled concern that junk-rated energy producers won't be able to stay solvent.

US mutual fund and exchange-traded fund investors held about US$144 billion in Chinese equities as of November 30, according to an analysis by the Investment Company Institute (ICI).

That is a small slice of the overall market, said ICI chief economist Brian Reid.

"The bigger impact is the knock-on effect to other global markets, not the direct exposure to China by US investors through mutual funds and exchange-traded funds," he said. Bloomberg