Recent market volatility was neither entirely warranted nor unexpected. It reflects Chinese concerns but it is fueled by international worries.

On Monday, China’s A-shares plunged by about 7 percent, while the renminbi dropped to 6.52 relative to US dollar. The CSI 300 index, which tracks large-cap stocks in Shanghai and Shenzhen, suffered the largest single-day plunge in months. The fall was fueled by soft data: Caixin PMI’s slowdown to 48.2.

In turn, moderate renminbi depreciation, with occasional volatility, is only to be expected after recent reforms of the currency peg and the ongoing yuan internationalization.

The market reaction was a strong one, but not exactly unexpected, due to the circuit-breaker effect, the expiration of a sales ban, amplified volatility, IPO tweaking and economic and international concerns.

Under the new circuit breaker rules, the trading of stocks, futures and options will be suspended for 15 minutes when the CSI 300 Index falls or rises by 5 percent. And when the index moves by 7 percent, trading will be halted for the rest of the session. While such circuit-breakers have been criticized, they have proved useful internationally, and could have been quite helpful last summer.

After weeks of extraordinary market volatility, Beijing imposed a half-year ban in July 2015 to prevent major shareholders from selling their investments. The ban allowed the government to stabilize the market: at year-end 2015, the Shanghai Composite was up 10 percent, while Shenzhen surged 65 percent.

On Monday, investors were concerned that major shareholders would sell with the expiration of the ban on Friday. In China, individual investors still dominate the market, whereas institutions are the minority. Consequently, Chinese markets are significantly more volatile than those in advanced economies.

Last July, the initial public offerings were suspended as part of measures to end the rout that impaired market capitalizations. Last month, the IPOs resumed while regulators moved ahead to curb market volatility. Despite decelerating growth, rebalancing is moving ahead. That will fuel conflicts between those who demand policy tightening and those who demand policy stimulus, while investors are left anxious.

It was the snowballing and confluence of these domestic concerns that led to the “Black Monday.” However, it is the deeper international anxieties that will drive volatility in the coming months.

What will make things a lot worse in the coming months are the Fed’s rate hikes, which will amplify the challenges, particularly in commodity-exporting emerging economies which are likely to suffer from budget and currency crises. Fragile developing economies will fare far worse.

Dr Dan Steinbock is founder of DifferenceGroup (www.differencegroup.net). He has served as the research director of international business at the India, China and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and at EU Center (Singapore). Shanghai Daily condensed the article.