Violent swings in China's stock markets on the first trading day of the year have again sparked fears over the country's economic prospects.

Analysts say the world will have to get used to slower growth in China, and more market volatility could be on the cards. However, it is not all doom and gloom, especially in the longer term.

China is Singapore's largest trading partner and also holds significant sway over regional stock and currency markets.

The benchmark Shanghai Composite Index fell 6.9 per cent on Monday, its worst start to a year on record. Declines in Chinese blue chips were so severe that a new circuit-breaker system forced the mainland authorities to halt trading early for the day.

Yesterday, the Shanghai Composite closed down 0.26 per cent after a choppy day of trading.

Some market watchers attributed Monday's fall partly to the release of a closely-watched manufacturing survey, which showed that the sector shrank for the 10th month running.

However, UOB senior economist Suan Teck Kin noted that Chinese manufacturers have been under pressure for some time amid weak global demand for exports.

Manufacturing as a share of China's economy has been shrinking since 2013, even as the service sector grows in importance, he added. These shifts point to long-term structural changes in the country's economy which have been going on for some years.

"We should not be surprised that the manufacturing numbers are weak as the sector has been shrinking. This is not news," said Mr Suan.

Monday's market plunge was more likely a reaction to other factors, such as uncertainties over the outlook for the Chinese currency, he added.

Measures imposed in response to a market meltdown last year, including a ban on sales by large shareholders, were another factor. These measures will be lifted on Friday, likely prompting some investors to sell off their holdings in anticipation.

Bank of Singapore chief economist Richard Jerram said part of the panic also stemmed from a loss of confidence in the ability of Chinese policymakers to keep the yuan and stock markets stable.

"When they messed up the market support, and when they messed up the devaluation, people realised that they are as fallible as the rest of us. It is not so much of a change in the economic situation but a change in the confidence and the people's expectations of policymakers," he said.

Still, Mr Suan said China's long- term prospects are far from dire. Its economy is expected to grow at about 6.5 per cent this year, considerably slower than the 10 per cent it has averaged over the past 25 years.

However, its economy is now much larger.

"One percentage point of growth today is much larger than it was a decade ago. Besides the scale, the quality and type of growth have also changed," Mr Suan said.

Singapore has been feeling the effects of a slower China for some time now, and this is set to continue, said Mr Jerram.

"It is right to say that Singapore needs to recalibrate our expectations. You just have to get adjusted to the fact that it is never going to get better.

"We are not going to get back to where it was five years ago. It was just an exceptional convergence of positive circumstances."

CIMB Private Bank economist Song Seng Wun agreed that it is not realistic to expect a turnaround on China's slowing growth.

Having just returned from Shanghai, he noted that crowds at fancy restaurants there have thinned. "But it has not collapsed," he said.

Mr Song also cited the recovery of visitor arrival numbers from China for the first 10 months of last year as an indication that the average Chinese is still spending despite the slowdown.

"We are definitely looking for clearer signs of stability from China. But it is not all that bad. It is not a slump in growth."