Stock markets around the world fell on Wednesday after White House economic adviser Larry Kudlow said in an interview on Fox Business Network that the Donald Trump administration had not softened its stance on China.

Added to the ongoing concerns about disruption to global supply chains resulting from the US administration's attack on China's plan to upgrade its manufacturing, along with expectations the Federal Reserve will continue to raise interest rates, it is natural that nervous investors are seeking safer places to put their money.

Chinese investors have proved to be no exception and the benchmark Shanghai Composite Index was down 0.93 percent and the Shenzhen Component Index down 1.06 percent at close of business on Thursday. And Chinese equities are now down 20 percent on the year's high in January.

To be fair, the jitters of Chinese investors are aggravated by the government's ongoing efforts to deleverage and tackle financial risks, as well as the macro data for May, which suggest industrial output, investment and retail sales all grew slower than expected.

However, the current sentiment reflected in China's falling stock market reflects an emotional response to the short-term uncertainties rather than a rational appreciation of the country's long-term prospects.

As central bank governor Yi Gang noted last week, China has good economic fundamentals, resilient economic growth and balanced supply and demand. Even a full-blown trade war between China and the United States is expected to cut only 0.1 to 0.5 percentage points off China’s economic growth, dependent on the scale of tariffs on Chinese exports. And given that officials from the two countries are still actively discussing ways to avoid this worst-case scenario, there is no reason to think the fallout from the two sides’ trade quarrel cannot be managed.

However, while their dispute in all likelihood will end with a relative whimper rather than a bang, there is no indication of when that might arrive. Until the dust settles and the global economy stabilizes, investors will continue to find their nerve being tested.