Global spillovers from China's slowdown have been “much largerthan we could have anticipated,” affecting the global economythrough reduced imports and weaker demand for commodities, IMFEconomic Counselor Maurice Obstfeld said in an interview posted onthe fund's website.

After a year in which China's efforts to contain a stock-marketplunge and make its exchange rate more market-based roiled markets,the health of the world's second-biggest economy will again be akey issue to watch in 2016, Obstfeld said.

“Growth below the authorities' official targets could againspook global financial markets,” he said as global equities onMonday got off to a rough start to the year. “Serious challenges torestructuring remain in terms of state-owned enterprisebalance-sheet weaknesses, the financial markets, and the generalflexibility and rationality of resource allocation.”

Obstfeld, who took over as chief economist at the InternationalMonetary Fund in September, said emerging markets will also be“center stage” this year. Currency depreciation has “proved so farto be an extremely useful buffer for a range of economic shocks,”he said.

“Sharp further falls in commodity prices, including energy,however, would lead to even more problems for exporters, includingsharper currency depreciations that potentially triggerstill-hidden balance sheet vulnerabilities or spark inflation,” hesaid.

With emerging-market risks rising, it will be critical for theU.S. Federal Reserve to manage interest-rate increases afterlifting its benchmark rate in December for the first time since2006, Obstfeld said.

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