The official statistics from the Chinese government last month showing that the world's second-biggest economy grew by 6.9 percent in the fourth quarter gave a brief shot of confidence to investors.
"There's no seal of approval on Chinese GDP data, but it was relatively good news in a market starving for good news," said Jorge Mariscal, emerging markets chief investment officer for UBS.
And the warm glow didn't last very long.
Worries about China aren't the only factor driving the sell-off in stocks worldwide over the first few weeks of the year, but it is apparently as good a reason as any to take money off the table.
"U.S. investors have to come to grips with the fact that China is growing at a slower pace," said Joseph Quinlan, chief market strategist for U.S. Trust. "They're still getting used to the idea."
It's not news that China is slowing down. After decades of double-digit annual GDP growth, the Chinese economy has necessarily begun to slow.
The debt-fueled investment and government infrastructure spending model of the country is giving way to a slower, more consumer-driven economy. The domestic-service sector of the economy is growing rapidly — just not enough to pick up the slack of the slowing manufacturing sector.
"We've been talking about the deceleration of the Chinese economy for a long time, but the data was remarkably weak in the fourth quarter," said Leland Miller, president of the China Beige Book, which collects financial data on the Chinese economy. "If that continues, it could signal a new phase of the economic slowdown in China."
The possibility is frightening financial markets in China and elsewhere. Global exposure to Chinese financial assets is minimal, but the country has been the biggest engine of growth in the global economy for a long time.
China has accounted for 30 percent and more of worldwide economic growth over the last decade, and if aggregate demand there falls significantly further, companies and countries around the world will feel it.
"The more important aspect of global exposure to China is the overall risk of having such a large economy slowdown," said Mariscal at UBS.
The adjustments needed as China makes its economic transition won't be painless. Inefficient state-owned enterprises need to be restructured and deleveraged, and the financial system likely has a huge volume of nonperforming loans in the manufacturing sector.
"Transitions are tricky," said Quinlan at U.S. Trust. "I think China is about where Ohio and Michigan were in the 1980s." That said, he believes the economy is growing at a rate of between 5 percent and 6 percent annually — still far faster than most other major economies in the world.
The problem isn't just that the Chinese economy is slowing down, however. It's that Chinese policymakers appear unwilling to fully accept it.
The government's fitful commitment to the restructuring of the economy and reform of its financial markets has produced a high level of anxiety in the global investment community. The short-lived circuit breaker experiment in China's domestic stock market was just the latest example of the government's ambivalence toward market forces, and it served to further undermine investor confidence.
"The stutter-stepping to financial reform creates its own problems," Quinlan said. "I think investors give China the benefit of the doubt when it comes to economic growth, but they're worried about the government's management of the currency and financial markets."
This is a communist party trying to communicate with capitalists. It's more than likely that Chinese authorities will continue to make mistakes and send mixed signals to participants in the currency and financial asset markets.
"Chinese policymakers are losing credibility," said Miller of the China Beige Book. "They need to be consistent, and they have to communicate the idea that they're restructuring the economy for slower, healthier growth.
"They have to be willing to endure pain and keep their foot to the pedal of restructuring and reform," he added.
Old habits, it appears, die hard — particularly for authoritarian governments. The continuing restrictions on institutional shareholders of Chinese stocks will continue to stunt the market.
Investors also remain anxious about the government's policy in regard to the currency, which remains pegged to a basket of foreign currencies. "This mini crisis was largely self-made," Mariscal said. "The Chinese authorities have the will to reform, but they're learning as they go.
"The good news is, they can improve," he added. "The bad news is, they haven't yet."
Meanwhile, Miller believes the education process for Chinese policymakers will take years and likely cause a lot more volatility in financial markets.
"There's really no way of avoiding a series of crises in China," he said. "With poor visibility on the economy, people will assume the worst."
They may already be assuming the worst. The Hang Seng Index of Hong Kong-listed Chinese companies is down almost 40 percent from its high last April. Mariscal at UBS said equity valuations are discounting a hard landing for the economy, and it may represent a buying opportunity. He has an underweight position in emerging markets as a whole because of tanking commodity prices, but is overweight China within that position.
The outlook for China this year is likely more volatility. Most economists believe China will continue to grow by at least 5 percent annually and that consumer spending will account for a growing share of the economy.
"I'm confident they can manage the economic transition, but they need to accelerate the liberalization of their capital markets and communicate policy better," said Quinlan at U.S. Trust.
You might not want to bet on that.
— By Andrew Osterland, special to CNBC.com