Interview: Daniel Gros: Gloomy global economy should not be attributed to China's economy

World markets experienced a "Black Monday" rout as anxiety over world economic prospects have been accumulating recently.

Meanwhile, world currency and commodity markets have also been affected by the fluctuation.

Among the worst-hit, Chinese stock markets plummeted dramatically for five straight days, crashing to its lowest level since December 2014.

Though the turbulence in financial markets was triggered by volatile Chinese markets, said Daniel Gros, director of the Centre for European Policy Studies (CEPS) in Brussels, this does not mean that the economic problems in China are responsible for the weak state of the global economy.

Analysts said the fundamental reasons for the recent global market turmoil are the anxiety aroused by U.S. interest rate hike predictions and fragile world economic recovery.

"With nervous (and illiquid) financial markets, sometimes 'small' news can lead to large moves. The rebound in some markets, such as the U.S. and East Asia, shows that there was a problem of liquidity, otherwise you could not explain very large moves with so little news," Gros said.

In fact, global economic recovery is still weak and uneven. Though the United States and Europe are already on the road to recovery, the growth momentum has been far from strong.

By contrast, China's economy is slowing down, as it shifts from export-led growth to consumption. But it's still growing at seven percent, nearly three times as fast as the West's star performers, Britain and the United States.

"The slowdown of Chinese economy growth rate was a natural consequence of an over-investment cycle, which is now nearing its end," Gros said.

After the financial crisis, developed countries sought to use quantitative easing policy as a major measure to bolster their growth, which consequently resulted in a relapse of the world economy.

"The huge investment stimulus after 2009 propped up growth in China, but this was bound to be temporary," he said, "some slowdown, especially of investment, is thus welcome today."

The economist advised that the outflow of investment needs to be compensated by higher consumption and an expansion of services in China.

Moreover, the emerging economies have been hit hard as the global rout continues. The currencies of Russia, Indonesia, South Africa, Brazil and other commodity exporters tumbled to multiyear lows against the U.S. dollar. Stock indexes collapsed and investors pulled money from developing markets.

"One must distinguish between emerging market economies (EMEs) in general and China," the economist said, "The commodity exporting EMEs are in deep trouble because of the fall in export prices."

He added, "some of them (Russia, Brazil) have failed to make reforms to foster manufacturing exports. Few EMEs have the classic problem today of a large foreign debt but they start running current account deficits, which they cannot do for long."

Though the fast-growing trend in emerging economies may stagnate or reverse, the global economy will slow as a result, but that does not mean it will crash, Gros stressed.

But he did warn all players to keep calm during the storm ahead.

"The central banks will have to easy gently, but do not try to 'paper over' real problems whose resolution is unavoidable," Gros said. Endit