THE FSTE 100 lost £74 billion yesterday as the full extent of China’s economic slowdown was realised.

Chinese stocks fell by 8.5 per cent, the biggest fall since 2007. That plunge wiped out all of this year’s gains as investors refused to be reassured by the Chinese government’s repeated attempts to shore up confidence.

Xinhua, Beijing’s official, and mostly optimistic, mouthpiece called yesterday Black Monday.

London’s FTSE 100 index closed down 4.6 per cent at 5,898.87, with the major markets in France and Germany down by 5.5 per cent and 4.96 per cent respectively. £73.75bn was wiped off the FTSE 100 as a result of the falls.

Wall Street’s Dow Jones initially fell 6 per cent, but recovered to trade just 0.8 per cent lower.

Shares in Asia were hit overnight, with the Shanghai Composite in China closing down 8.5 per cent, its worst close since 2007.

$42.51 Brent crude fell to lowest level since March, 2009.

Currencies and commodities are also falling sharply, because those markets rely heavily on strong demand from China.

The pound fell sharply against the euro, putting it on track for its biggest one-day loss against the single currency in six years, as expectations of a UK rate increase cooled.

Professor David Bell, from the University of Stirling, said: “There’s a lot of uncertainty about the prospect for the Chinese economy. The government has devalued the currency on three occasion in the last two weeks which came as a bit of a surprise. And investors don’t really like surprises.

“There has been a big boom in Chinese stock prices over the last couple of years and so I don’t think the value of stocks has fallen back to where they were at that time but nevertheless the Chinese economy needs a rate of growth that’s well in excess of what we can expect largely because of the flood of people into the industrial areas in the country having to be found jobs.

"And that’s only going to happen if the economy continues to grow at the rate it’s been growing at. A growth rate of 5 per cent in a way which would be very good for us they would see as a potentially serious problem."

Gordon Brown’s former special adviser Damian McBride was so panicked by the Chinese economy’s fall he took to Twitter to warn his followers on how to cope with the crash. His advice included getting hard cash in a safe place and not relying on banks to be open or bank cards to work. He also advised families to agree a rally point and have enough food and water to last a month indoors.

Bell thought that advice was “possibly an overreaction”.

Bell said: “If the Chinese economy collapsed what would be the problem for us? We wouldn’t be importing as much, but we don’t export a huge amount to China. It’s a much, much bigger problem for Germany than it is for the UK. They have a much a larger trading relationship than we do.

“I’m not yet buying extra tins of food.”

A Scottish Government spokesman said the conditions for Scottish exporters could be challenging: “China is currently a relatively small export market for Scotland, accounting for around 2 per cent of Scottish exports.

"Although problems in emerging markets and the Eurozone may mean that Scottish exporters face challenging conditions in some markets during 2015, robust growth in markets like the US should continue to provide positive opportunities for Scottish exporters.”

However, David Frost, Scotch Whisky Association chief executive, said he had confidence: “Direct exports of Scotch Whisky to China grew from around £1 million at the start of this century to a peak of over £70m in 2012, before falling back to around £40m last year under the pressure of Chinese government austerity measures and economic slowdown. We constantly monitor the current economic and financial situation in China and its potential impact on Scotch exports.

"We have confidence in the future of the market in the long term.”