BEIJING, 8th January, 2016 (WAM) — Chinese stocks bottomed out from yesterday’s heavy losses, following an announcement by the Securities regulator that it was suspending the “circuit breaker” mechanism.

The benchmark Shanghai Composite Index gained 1.97 percent to close at 3,186.41 points on Friday. The smaller Shenzhen index gained 1.2 percent to close at 10,888.91 points, state news agency,Xinhua, reported.

Total turnover on the two bourses stood at 761.6 billion yuan (116.03 billion U.S. dollars).

The circuit breaker, which came into effect on Jan. 1, was triggered on Monday and Thursday, after the Hushen 300 Index plunged 7 percent on both trading days.

“Currently, the negative effects of the mechanism are greater than the positive effects. Thus, the China Securities Regulatory Commission (CSRC) decided to suspend the mechanism to maintain market stability,” a CSRC spokesperson said on Thursday night.

Sentiment was also lifted by a renewed government pledge to slash excessive industrial capacity in some sectors.

Sub-indices related to coal mining, steel, and non-ferrous metal led the gains on Friday, all of which are mired in excess capacity.

During an inspection tour earlier this week in north China’s Shanxi Province, which is known for large coal reserves, Premier Li Keqiang called for “unyielding effort” to eliminate excess industrial capacity to make way for new growth engines.

Over 20 coal sector stocks rose by the daily limit of 10 percent.