LONDON - Experts believe that worries over the current setbacks of the Chinese equity market and China's economic outlook are exaggerated and that there is still long-term growth potential in the cards for the country.

Market overreaction

Mark Williams, chief Asia economist at Capital Economics, was critical of investors' reaction to China's equity bubble in an analysis piece.

"Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China's economy," he said.

The Chinese stock market has suffered a setback which came after the release of weak economic figures and a depreciation of the Chinese currency, or renminbi (yuan).

The benchmark Shanghai Composite Index closed 1.27 percent lower at 2,927.29 points on Wednesday. Two days before, it lost 8.49 percent, recording its biggest daily slump since February 2007.

"The surge in prices that started a year ago was speculative, rather than driven by any improvement in fundamentals," Williams said.

"Similarly, falling equity prices in China shouldn't be a cause of trouble in the wider economy or abroad. Only one in 30 people in China owns equities. Just 2 percent of China's equities are owned by foreigners," he said.

Anatole Pang, sector lead for financial and professional services at the China-Britain Business Council (CBBC), said in a statement that despite all the turbulence, gloom and speculation, "we are learning very little new about the China story from what we knew before."

Pang believed that the devaluation of the yuan was quite natural, but that it will of course have a knock-on effect as people want to exit yuan assets.

"China is entering a sustained period of slower growth -- the so-called 'new normal.' British companies need to plan for this, but equally recognize it is reduced growth in an enormous market, with ever increasing opportunities for British companies across many sectors," Pang said.