Chinese shares continued to drop on Tuesday, following the biggest loss in nine years on Monday and denting the FTSE All World index.
The Shenzhen closed 1.86 per cent down on the day, while the Shanghai Composite Index closed down 0.26 per cent for the day.
The continued uncertainty and market falls in China led to a 2.7 per cent fall in the FTSE All World index, the largest drop since the China turmoil last summer.
Yesterday saw the CSI 300 index – the top 300 stocks from the Shenzhen and Shanghai Composite – fall 7 per cent, triggering newly-introduced circuit breakers that halted trading for the day.
Maurice Obstfeld, director of research at the International Monetary Fund, says “serious challenges” remain in China in restructuring the economy.
In particular he identified balance sheet weakness, the financial markets and “the general flexibility and rationality of resource allocation”.
He adds that “China will remain high on the list” of the key issues we need to pay attention to in 2016.
He says: “Its economy is slowing as it transitions from investment and manufacturing to consumption and services.
“But the global spillovers from China’s reduced rate of growth, through its diminished imports and lower demand for commodities, have been much larger than we would have anticipated.”