While a weaker yuan would make Chinese exports cheaper overseas, and foreign products more expensive in China, it would be unlikely to go down well among the country’s trading partners.

“There are some good reasons why the headwinds facing Canadian companies might not dissipate in the near future”, said Kara Lilly, a strategist at Mawer Investment Management. In China’s case, that was up to US$4.26 trillion, Zhang wrote. ]

New Zealand, Australia and Canada’s currencies are among those bearing the brunt of the disruptions in China, a key buyer of those nations’ commodity exports, with the Aussie suffering the worst start to a year since it began trading freely three decades ago.

In the background there are also questionmarks over whether another bout of turbulence from China, accompanied by a broader “hard landing” for the economy, could stay the U.S. Federal Reserve’s hand on further rises in interest rates this year.

The central bank’s decision to let the yuan weaken came after China spent billions in a bid to stem the currency slide.

With the country’s economy slowing faster than they expected, and debt mounting rapidly, policymakers are running out of levers to pull to stimulate the economy.

The level of the stock market index is only an indicator of the complex mix of investor greed and fear.

On Wall Street, energy stocks pared a 2-percent loss and major indexes were down about 1 percent, about half as much as at their session lows. And the sell-off this year in Europe surpassed 5 percent, as Germany’s DAX fell below 10,000 for the first time since October.

Balding said China’s finance regulators didn’t appear to comprehend “what markets are, how they work or how they are going to react”. He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported. Chinese stocks closed 2.04 per cent higher. Thursday saw China’s stock markets abruptly shut after 29 minutes of trading, the shortest trading day in its history. “It accelerates the selling”, Ms. Tan said. “Uncertainty from the FX market and the associated effect on the equity market volatility could cause renewed uncertainty shocks (similar to those seen last summer from the significant equity and FX market corrections) and are a source of downside risk to our economic growth outlook”, they conclude. Kuijs said.

While Xi past year secured the yuan’s designation as a global reserve currency and raised his nation’s profile on the world stage with state visits to the USA and United Kingdom, his handling of the market crash and concerns about the slowest economic growth in a quarter century raised questions about the government’s commitment to the market-oriented changes needed to guide growth lower.