The latest signal of China's stalling economic growth triggered steep losses across Asian markets Friday as doubts build about Beijing's ability to get the world's No. 2 economy back into gear.
Worries about China's growth in recent days have unnerved investors across Asia, the U.S. and Europe, pressured emerging-market currencies and commodities and driven cash toward safer assets like gold. Analysts say they are on the lookout for fresh stimulus efforts from China, possibly as early as this weekend.
Losses this week in Hong Kong, Taiwan and Indonesia pushed those markets into bear territory, defined as a drop of more than 20% from a recent peak. Shares in Japan fell 3% Friday, logging their biggest weekly loss in a year by tripping 5.3%.
China's main stock index fell 11.5% this week, pushing near it near the lowest point hit during this summer's selloff, which had wiped out roughly a third of its value and prompted a major rescue effort by Beijing. The Shanghai Composite Index closed down 4.3% at 3507.74, just a whisker above the summertime low recorded on July 8.
Concern about China has gathered momentum in recent weeks, both because of its stock-market rout and a surprise move to devalue the yuan—a step that would make its exports more competitive. A new trigger emerged on Friday with an early read on China's factory activity, which fell to a six-and-a-half year low.
Prior data from China have been equally dismal: Exports in July tumbled 8.3% from a year earlier and big-ticket investment has sputtered. U.S. companies have cited a slowdown in the world's second-largest economy for weaker earnings going forward.
Most economists say Beijing will struggle to meet its 2015 growth target of about 7% despite cutting interest rates four times since late last year, ramping up infrastructure spending and easing lending conditions. The tough road ahead sheds some light on Beijing's decision to reset its currency policy last week.
China's stock market has now lost most of the upside it gained after the government stepped in with a range of rescue measures, from a stabilization fund that has spent tens of billions of dollars to prop up the market, to the banning of share sales by state-owned firms.
But Beijing's unpredictability has damaged investor confidence in its capacity to put a line under losses. On Friday, the Shanghai index briefly breached the 3500 level, the bottom of a 500-point range many analysts expected Beijing would maintain.
"Investors are increasingly cautious…the expectation that sustained government funds would prop up the market is diminishing," said Tang Yonggang, an analyst at Shenwan Hongyuan Securities. Turnover on the Shanghai and smaller Shenzhen market was 981 billion yuan ($ 153.4 billion) on Thursday, the lowest since August 10, according to Wind Information Co, meaning that more investors are staying on the sidelines.
Meanwhile, China's move to weaken the yuan both sparked worries about heightened competition and weaker demand for the region's exports of commodities and electronics components. Resources-sensitive currencies such as Malaysia's ringgit and Indonesia's rupiah sank to fresh 17-year lows Friday of 4.1840 and 1,3947, respectively, against the U.S. dollar. India's rupee fell to a fresh two-year low of 65.92 against the U.S. dollar.
The currency in South Korea, which sends more than a quarter of its total exports to China, also suffered steep drops on Friday, with the won down 0.8% at 1,193 per dollar.
China's slowdown continues to heap pressure on commodities prices, which have plumbed new lows in recent weeks. Crude oil is hovering above $ 40 a barrel and industrial metals from copper to aluminum hit six-year lows in the past two weeks.
The jitters are sending investors to assets perceived to be safer. Earlier Friday, gold hit a six-and-a-half week high amid the volatile currency moves. The yellow metal is currently trading roughly flat in Asia at $ 1,150.90 a troy ounce.
Investors also funneled into Asian government bonds, though activity settled in later trading. Yields on benchmark 10-year Australian government bonds fell as much as 0.08 percentage point to 2.59%, while those on China's 10-year government bonds fell as much as 0.09 percentage point to 3.52%. Yields fall when bond prices rise.
Some economists say that Beijing has plenty of policy tools at hand to rev up its economy, and expect Beijing could cut the amount of deposits banks are required to hold as soon as this weekend. Credit growth is starting to accelerate, which should trickle through to more activity, and there's scope for greater fiscal spending as local governments seek to meet annual budget targets, wrote Julian Evans Pritchard, an economist at research firm Capital Economics in a research note.
Others see hope that China's growing economic problems could provide a much-needed catalyst for change. "The most important thing for China is to get its house in order, and a crisis is the best time to do that," said Li Wei, professor at the Cheung Kong Graduate School of Business. "Only in a crisis is there pressure for change. The world has been concerned with China's stock market. I say, bring it on."
—Anjani Trivedi, Yifan Xie and Fiona Law contributed to this article.
Write to Mark Magnier at mark.magnier@wsj.com and Chao Deng at Chao.Deng@wsj.com
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