Chinese stocks yesterday recorded their biggest fall in more than a year as investors fretted that a slowdown in bank lending would stall the economic recovery both in China and around the world.

The 6.7 per cent slump was the worst since June 2008 and capped a dismal August for the Shanghai composite index, which recorded its second biggest monthly loss for 15 years. The index fell 21.8 per cent last month, compared with a 4.1 per cent drop by Hong Kong's Hang Seng index, a 3 per cent rise in the S&P 500 index and an 8.4 per cent gain in the FTSE 100 index over the same period.

Yesterday's decline in Shanghai also led US and European markets lower amid concerns that any faltering in the Chinese recovery could drag on economies elsewhere as they emerge from the worst economic crisis since the 1930s.