New year, new fear. Markets incurred big losses this week as Chinese tremors and confusion over Beijing’s response spurred volatility around the world.

In the US, the S&P 500 has not had as bad a start to a year since 1928. Trading floor wags say 358 days remain in 2016 for the markets to recover their week one losses.

What's going on? Interviewed by The Irish Times, Central Bank governor Philip Lane noted "an unusually high amount of uncertainty" in the world economy. Yet he saw good news in the advancing recovery in Europe, supported by low oil prices. He also saw good news in the Fed's recent rate increase as it signalled robust US growth.

But there’s no avoiding emerging markets, bigger now than before 2007. “If the emerging markets go through a substantial slowdown, that can have effects on global trade and on the global financial system because the emerging markets have issued a lot of debt, mostly non-sovereign. There was a lot of corporate debt in recent years.”

Lane saw reason for a “measured and differentiated” assessment. Although China is at the centre of the action, places such as Brazil were more exposed. Brazil, he said, had been running external deficit and had a heavy reliance on foreign currency debt.

“If you’re in Brazil or many other emerging markets, it’s difficult to raise international funding in your local currency; essentially you’re mostly reliant on dollar funding.” Such funding becomes more expensive as US interest rates rise.

Lane said China had much more scope to intervene as its economy moves into a consumption phase from investment.

“Those economies like China, which have a long sequence of external surpluses, have a large bank of foreign reserves. They have a lot of policy instruments to deal with any problems that emerge,” he said.

In financial markets, however, Beijing is in trial-and-error mode. The deployment of “circuit breakers” to avert panic had the opposite effect.