Claudio Borio, head of the BIS' monetary and economic department, said falls in China's stock market should be seen as part of a broader response to increasingly stark financial imbalances.

“Taking an even longer-term perspective, as argued in detail in the latest BIS Annual Report, all this points to weaknesses in domestic and international policy arrangements - arrangements that have so far been unable to constrain sufficiently the build-up and unwinding of hugely damaging financial booms and busts across countries,” he said in a statement issued to the BIS website. “Hence a world in which debt levels are too high, productivity growth too weak and financial risks too threatening. This is also a world in which interest rates have been extraordinarily low for exceptionally long and in which financial markets have worryingly come to depend on central banks' every word and deed, in turn complicating the needed policy normalisation. It is unrealistic and dangerous to expect that monetary policy can cure all the global economy's ills,” Borio said.

The latter part of the summer has seen Chinese markets go sour, while worries about Greece and its debt, while they have abated slightly for now, continue on the sidelines. The MSCI All China Index (in dollars) is down more than 6.6 per cent since January. Other barometers for China equities are in the red over this period.

Borio said data available to BIS showed that credit flows to emerging markets had already started to decelerate back in the end of 2014, and slowed more rapidly thereafter.

“As highlighted in a number of BIS publications, the total amount of dollar credit to non-bank borrowers outside the United States had risen by over 50 per cent since early 2009, to 9.6 trillion by end-March 2015, and almost doubled for EMEs, to over 3 trillion. Much of it has found its way to corporates, raising serious questions about the financial vulnerabilities involved and the implications for self-reinforcing movements in exchange rates and credit spreads. Hyun will say more about this in a minute,” he said.

“Even more important are shared vulnerabilities in domestic balance sheets, which have gradually emerged over the years as our movie has been playing. After all, when measured against GDP, while the size of foreign currency debt has indeed grown substantially, for most EMEs it remains below the levels reached ahead of previous financial crises,” he said.

“But since at least 2009, domestic vulnerabilities have developed in several EMEs, including some of the largest, and to a lesser extent even in some advanced economies, notably commodity exporters. In particular, these countries have exhibited signs of a build-up of financial imbalances, in the form of outsize credit booms alongside strong increases in asset prices, especially property prices, supported by unusually easy global liquidity conditions. It is the coincidence of the reversal of these booms with external vulnerabilities that should be watched most closely. A holistic view is critical. We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines,” he said.