WASHINGTON (Sputnik) – By the end of the day Friday, global markets concluded their worst week in 2015. China continued to experience major stock market selloffs, following last week’s currency devaluation.
“The worst case is one where China’s problems are more difficult to resolve and a sharper downturn in Chinese growth spills over to the rest of the world – which it inevitably would,” DeBolle said on Friday.
DeBolle, a former economist at the International Monetary Fund, noted that problems in emerging markets are being driven primarily by uncertainty over China, the fall in commodity prices, and the anticipated rise in US interest rates.
If China is unable to come out of its current slump, “vulnerable countries such as Brazil, Russia, Turkey, might topple into more severe crises,” DeBolle noted. In turn, a downturn among those countries “would likely have bad repercussions for both Europe and the US.”
Beginning on August 11, China allowed the yuan to depreciate in an attempt to halt large-scale stock market selloffs and boost sluggish economic numbers. The depreciation makes Chinese exports less expensive and imports more expensive.
Despite the currency adjustment, the Chinese stock market continued to post losses this week, followed by most other major markets around the world.