The Australian market closed more than 1 per cent lower, chalking up its seventh straight session in the red with the benchmark S&P/ASX200 index was down 58.6 points, or 1.17 per cent, at 932.2 points.
Fund managers and brokers said that while the NZX50 index was weaker, trade was subdued, adding the shift down was a natural retracement after the market put on a hefty 13.2 per cent gain over the December quarter alone.
Andrew Bascand, managing director and portfolio manager at Harbour Asset Management, said Chinese share market represented a small proportion of the overall economy, and global funds' exposure to equities markets there was very small.
"Most of the market measures of investor sentiment have 'panic' and that's generally not a bad time to assess the opportunities to invest," he said.
The volatility looked likely to continue as investors focused on short term events, Bascand said.
China will face great difficulty in achieving economic growth above 6.5 per cent over the 2016-2020 period due to slowing global demand and rising labour costs at home, the China Securities Journal quoted the president of the State Council's Development Research Centre Li Wei as saying.
"In the last 30 years of reforms and opening up, China's gross domestic product has posted annual growth of around 10 per cent," said the report, quoted by Reuters. "Against this, 6.5 per cent is not high, but it will be very difficult to achieve this pace of growth," Li said.
Nobel Prize-winning economist Joseph Stiglitz said China was not facing a "cataclysmic" economic slowdown and last week's market turmoil was more about badly designed stock market circuit breakers. The circuit breakers, which caused local stock exchanges to close early on two days last week after stocks plunged to a 7 per cent limit, weren't as well designed as they could be, Stiglitz in an interview with Bloomberg Television interview in Shanghai.
The market closures and lower daily fixing rates for the nation's currency against the dollar roiled global markets, heightening anxiety that it could presage a deeper slump with growth already at a 25-year low in 2015.
"There's always been a gap between what's happening in the real economy and financial markets," said Stiglitz.
"What's happening in China is a slowdown by all accounts. It's a slow process of slowing down. But it's not a cataclysmic slowdown," he said.
HSBC, the biggest foreign-owned bank in China, said investors should "hang in there".
HSBC Bank economists Frederick Neumann and Qu Hongbin said the region would increasingly feel the pinch as growth on the Chinese mainland continues to slow.
"Lower commodity prices, for example, are not lifting growth in Asia, hurting exporters while failing to spur spending elsewhere," Neumann and Qu said in a report. "Then there's weaker Chinese appetite for machinery and consumer goods, which is keeping a lid on trade even as shipments to the West are stabilising," they said.
"Add to this increasing worries over China's currency - unfounded in HSBC's view - and it's easy to see why investors are feeling jittery," they said.
"In short, the Year of the Monkey is not going to offer an easy ride. But, hang in there. With the right reforms, and yet more easing where possible, Asia should make it through its current rough patch," they said.
