China's financial markets slumped on Friday on concerns over the strength of the U.S.'s economic recovery, the expanding eurozone debt crisis and sluggish global economic growth.

The stock market tracked a 521.76-point drop in the Dow Jones industrial average index on Thursday to end at a 7-week low on Friday.

The benchmark Shanghai Composite Index plunged to 2,626.42, down 57.62 points, or 2.15 percent, from the previous trading day.

The country's futures market also reacted strongly to Thursday's heavy sell-off on Wall Street. Aluminum futures prices for three-month delivery fell by 730 yuan (about 114 U.S. dollars) to 17,800 yuan per metric ton on the Shanghai Futures Exchange, while copper futures for October delivery broke 70,000 yuan per metric ton during morning trading.

Unencouraging numbers in U.S. economic data and the sovereign debt crisis in Europe stoked concerns that the global economy is heading for a double-dip recession.

Fan Jianping, chief economist at the State Information Center, said the economic slowdown in the U.S. and the eurozone debt crisis will mainly affect financial markets without doing too much damage to the actual economy.

"The possibility of a double-dip recession is slim, as the U.S. economy is still growing, albeit at a slow pace. Germany, an economic powerhouse in Europe, has not shown any signs of fatigue," Fan said.

U.S. unemployment data released on Thursday was unencouraging; key employment data for July, which will be released on Friday, is expected to cast even more gloom over the country's prospects for growth. Mounting U.S. debt pressure has also dragged down market sentiment.

According to Fan, the U.S. stock market slump can be regarded as a short-term correction amid weak market sentiment.

"The recent rally of the U.S. stock market outpaced prospects for economic growth, which also led to a sharp drop," Fan said.

However, Fan warned that China's exports, which contribute heavily to the country's economic growth, are expected to fall during the second half of this year because of weak global demand caused by the eurozone debt crisis and Japan's move to weaken its currency.

The European Central Bank decided Thursday to re-initiate bond purchases from troubled eurozone countries while keeping key interest rates unchanged.

Borrowing costs in bond markets have jumped for debt-laden Italy and Spain, fueling worries that European debt problems may spread to the two countries after Ireland, Portugal and Greece all received bailouts because of unsustainably high borrowing costs.

Also on Thursday, Japan's Finance Ministry and the country's central bank jointly intervened in the foreign exchange market to sell the yen for the U.S. dollar to stem the yen's appreciation.

Japan's move, its third intervention in foreign exchange markets since September 2010, came a day after Switzerland's central bank tried to curb the Swiss franc's rise.

The yen and the franc, traditionally considered to be "safe haven" currencies, have soared in recent months as debt crises and fears of slowing growth hit the U.S. and Europe.

Despite increasing global economic uncertainties, Wang Tongsan, director of the Institute of Quantitative and Technical Economics at the Chinese Academy of Social Sciences, remains upbeat about the global economy.

As the U.S., Europe and Japan are highly likely to continue their loose monetary policies in order to increase liquidity and stimulate their economies, Wang noted that China should guard against an influx of speculative capital.

"Higher interest rates for the yuan in comparison to foreign currencies will be a magnet for overseas capital, which may lead to an influx of speculative money and arbitrage speculation," he said.

Fan echoed Wang's views, saying that there is only a small chance that China's economy will witness a drastic and rapid decline as long as the government avoids tightening its monetary policies any more than it already has.

"The fundamentals of the economy remain sound," Fan said. China's gross domestic product (GDP) growth stood at 9.6 percent for the first half of the year, which is widely regarded as strong enough to ease fears of a hard landing, National Bureau of Statistics data showed.

Nevertheless, "if policies are tightened again, the Chinese economy may slow down more than expected as the result of worsened export prospects," Fan added.

"The country should not rush to increase interest rates or reserve requirement ratios during the short term," he said.

China hiked its interest rates three times and its reserve ratio requirement six times during the first half of 2011 to tackle surging inflation.