The Chinese authorities’ seemingly capricious decision last week to trigger circuit breakers, and then to rapidly remove them, added to the chaos in the country’s stock exchanges and intensified unease about the world’s second-largest economy and its commitment to free markets.

China has been roundly criticized for its hit-or-miss approach to keeping excessive volatility in check. Yet it may be worth recalling that similar mechanisms to halt trading when share prices drop or rise too precipitously are in place in many countries, including the U.S., and were developed over more than a century of trial and error.

The current system, which briefly suspends trading on the New York Stock Exchange in the event of swings between 7 percent and 13 percent and shuts the market for the day when the swings reach 20 percent, resulted from the so-called Black Monday crash of 1987. Before then, closures of the stock exchange took place, but in a more ad-hoc fashion: the five-day hiatus in 1933, imposed alongside Franklin Roosevelt’s famous bank holiday during the depths of the Great Depression; and the lengthy closure throughout the fall of 1914 at the outbreak of World War I.

David Fuller's view

On a short-term basis plenty of people are wary of China which is understandable.  However, longer-term investors may recall that China had the world’s best ever rate of GDP growth for over a generation.  The transition from a developing economy to a developed one is never easy.  However, the fact that China’s economic development has been so impressive tells us a great deal about the business acumen of its leaders.

I remain a long-term investor in China and will not sell my unleveraged holdings at today’s low valuations.  However, I did close my last small leveraged position in China earlier this week.