China will face a significant economic downturn that will affect the rest of the world, former U.S. Treasury Secretary Steven Mnuchin said, Bloomberg reports.

“Clearly China is going to have a significant slowdown and that will have an impact on the world economy,” said Mnuchin, now managing partner at Liberty Strategic Capital. “Things are going to get worse before they get better.”

People used to underestimate economic risks, he said, but now "we're overestimating them. All of a sudden everyone is incredibly negative."

“I think you are going to see inflation in the US will begin to come under control and it will probably be a two-year period,” he said. “But you’re going to begin to see that tightening relatively regularly. And I think people are overestimating the Federal Reserve’s actions just as they underestimated it.”