The global economy remains on a moderate recovery track but China’s slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said yesterday.

China’s growth, though seemingly still rapid, is ‘meagre’ compared to its social and demographic challenges, and its transformation will hurt its trading partners in the short term, said Nowotny, who is also the head of the Austrian central bank.

“The most urgent issue here is the financial volatility and economic weakness in various emerging market economies,” Nowotny told a conference in Budapest. “Recent developments in China – since last year, world’s largest economy in terms of GDP based on purchasing power parity – are of particular concern.”

The eurozone has struggled with weak growth and ultra-low inflation for years and its problems have been exacerbated by Chinese growth slowing to its lowest level in 25 years.

The weak China PMI is driving down prices

Oil fell two per cent yesterday as weak economic data from China, the world’s largest energy consumer, weighed on prices. China’s manufacturing sector contracted at the fastest pace since 2012 in January, adding to worries about demand from the world’s second-biggest economy.

“The weak China PMI [purchasing managers’ index] is driving down prices because China weighs on the entire commodities sector from the demand side of the equation,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

The ECB eased policy with a rate cut and an expansion of its asset purchase programme in December.

Nowotny said Europe is playing a role in aggravating China’s difficulties as the 19-nation eurozone is also failing to do its part to foster global growth.