Worries about a full-blown crash could be a bit premature

Are concerns over a new crash justified?

Emerging markets' currencies tumbling to near record lows. Millions of dollars worth of foreign funds pulled out of stock markets in the region. And some investors around the world fearing a major financial meltdown.

It certainly feels like we've been here before.

Many in Asia's financial circles are calling this a re-run of the 1997-1998 Asian financial crisis.

I remember that crisis well. I was a university student interning for the BBC in the summer of 1997 in Jakarta, and I witnessed the full brunt of the Asian financial crisis on some of the most vulnerable in society.

The Indonesian rupiah lost more than 80% of its value - going from 2,500 rupiah against the US dollar to 16,000 at its lowest point. The stock market wasn't spared - it fell by more than 50% by December 1997 and businessmen lost tens of thousands of dollars in a single trading session.

There was panic everywhere. People thought banks had run out of money (and some had), so they formed long lines outside branches, trying to withdraw all their savings. Factories shut down, and workers lost their jobs. The price of basic foods like cooking oil and baby milk soared.

An economist friend of mine in Indonesia once told me that you know you're dealing with a crisis when the "ibu-ibus" (Indonesian for housewives) are affected. Housewives in South East Asia's biggest economy saw the price of imported formula milk for their babies triple, leading to protests outside supermarkets across the country. One Newsweek article described how cooking oil was rationed and sold at police stations. "If they didn't, people would kill each other," the article said.

The meltdown in Asia was set off when Thailand floated the baht in 1997, setting off a domino effect in the region where one by one, currencies fell against the US dollar.

Today, many are worried that China's recent devaluation could set off a similar trend.

Bad news by the day

Some analysts are even warning the impact will be far bigger than 1997 because China's economy is far more important and integrated into the world economy than Thailand ever was.

China's devaluation has already led to the tumbling of currencies around the region.

And it seems like every day we get bad news about the world's second largest economy.

On Friday, data showed that China's factory activity shrank at its fastest pace in more than six years.

All of this adding to increased concerns that China's economy is slowing down - which it is - and how much of an impact the slowdown will have on the rest of the world.

Even the US Fed has raised concerns about the Chinese economy's outlook in its latest minutes.

The thinking goes that if China keeps slowing down, then it won't buy as much "stuff" from Asia as it has in the past, and that will mean Asian economies that have grown thanks to the commodity boom and Chinese demand will slow down too. We're already seeing evidence of this across the region.

Since China and Asia together make up more than half of global growth, a slowdown here is bound to have an effect on the health of the overall world economy.

So if at this point you are starting to feel a little unsettled about the future, I wouldn't blame you.

Chinese factory activity is also on a downward trend

Indian engine

But, when in doubt, reach for the hard facts and take a deep breath - and here's what Julian Evans-Pritchard, China Economist at Capital Economics, says:

"Sentiment [on China] is currently overly downbeat," he wrote on Friday. "The downside risks to short-run growth are now overstated.

"Credit growth has begun to accelerate on the back of recent policy easing, which should feed through into stronger activity, albeit with a lag. The fiscal stance is also set to loosen in coming months as local governments accelerate spending to hit annual budget targets. "

So if that's true - and credit growth in China is starting to pick up, those effects are typically often seen in the real economy within three to six months.

Emerging markets are also in a far stronger position than they were back in 1997-98. They have stronger current account balances, higher foreign exchange reserves and mostly floating as opposed to fixed exchange rates - which means they don't have to be defended from speculative attacks.

The other factor to consider is India's economy - it now claims higher growth than China's (although many analysts have questioned how those figures have been calculated) and its stock exchange - the Sensex - has seen record inflows in the last six months, attracting investors who have fled from the volatility in Chinese shares.

So it could provide an alternative engine for global growth, if the government's figures are to be believed. I'll be in Mumbai, India's financial capital next week, to see first-hand how much of that growth is actually being felt on the ground.

So that's all good news - and should have investors and policy-makers breathing a sigh of relief.

Daily stock market fluctuations in a highly connected and globalised world are to be expected, but they shouldn't necessarily be seen as the beginning of the end of the world.

What we should be paying more attention to, perhaps, is whether there are long lines outside of our banks and supermarkets. Now that's what you call a crisis.