Chairman Ben Bernanke's confirmation this week that the Fed planned gradually to reduce its $85 billion in monthly bond purchases has sent global financial markets into a spin and hit emerging economies particularly hard.

"As an economist, I can tell you that China is my biggest worry right now," Ksenia Yudayeva, the Kremlin official in charge of preparations for the G20 leaders summit in St Petersburg in September, told Reuters.

Even as Chinese economic growth slows, its financial system has shown increasing signs of strain, with money market rates skyrocketing. That will make it harder to complete a transition from growth driven by exports and investment to a model that relies more on strengthening demand.

"In a sense, the world's success depends on how China copes," Yudayeva said in an interview on the sidelines of the St Petersburg International Economic Forum.

So-called spillover effects, resulting from massive flows of cheap money created by the West's central banks, are likely to dominate the G20 agenda ahead of finance talks in Moscow in a month's time.

By that time, Yudayeva said, financial markets should have calmed down after what she described as an over-reaction to the prospect that the Fed would wind down its policy of quantitative easing.

NO MORE CURRENCY WARS

When finance ministers and central bankers met in Moscow in February, all the talk was of currency wars, set off by Japanese Prime Minister Shinzo Abe's launch of pro-growth policies that caused the value of the yen to fall sharply.

With capital now turning tail from emerging markets, sending their currencies and financial assets lower, complaints over competitive devaluations by the rich but heavily indebted Western nations have fallen silent.

"I never understood what currency wars are," said Yudayeva, who also played down calls by Russia's own finance minister, Anton Siluanov, for a weaker ruble exchange rate.

"After Japan we don't see countries trying to do this — even in Russia this is totally exaggerated."

Russia is less directly exposed to a possible withdrawal of Fed stimulus because foreign investors have relatively low exposure to its financial assets, she said.

But a sharp fall in the price of oil — Russia's main export revenue earner — would have a more serious impact on the $2.1 trillion economy.

"Russia didn't have any large-scale capital inflows as a result of non-conventional policies, so there is not going to be much effect for the markets directly," she said.

"The effect on Russia depends mostly on expectations of the impact of this policy on the price of oil."