Stock markets across the world slumped on Monday as China continued its struggle to bring its economy under control. Last Thursday, there was a record spike in commercial lending rates as the government took measures to limit risky credit growth.

While China’s economy has grown at breakneck speed for the last few decades, it now faces the same problem the United States faced in 2008: a credit bubble. Excessive borrowing during its boom years has caused Chinese businesses to rack up huge amounts of debt that they can’t pay back. Now the Chinese government is cracking down to try and prevent a serious meltdown like the U.S. had.

But the crackdown is coming at a difficult time. The hsbc Purchasing Managers Index for May rated China at 49.2, indicating that its manufacturing sector was shrinking; a rating over 50 means a country’s manufacturing sector is expanding. A shrinking manufacturing sector suggests that China’s exports are falling. But if China’s exports are falling, how will it be able to pay its massive debts?

A full-blown economic crisis in China would have serious repercussions for the rest of the world, considering the U.S. is also going through some shaky financial times as the Federal Reserve looks to tighten its ultra-loose monetary policy as well. If China’s exports diminish, China’s manufacturers will inevitably decrease their imports of raw commodities. Commodity producers will feel the squeeze.

And no nation will feel it worse than Australia.

In fact, Australia is already beginning to feel the effects. Newcrest Mining, Australia’s biggest gold mining company, saw its stocks fall 7.9 percent on Monday to near 10-year lows. Newcrest Mining’s stocks have been sliding for months but this has been its biggest hit. Two of the world’s largest coal mining companies, Peabody Energy Corp and Glencore Xstrata, announced on Tuesday that they would be cutting a combined 500 mining jobs in Australia. Anglo American Chief Executive Officer Mark Cutifani said, “In the past 12 months alone, close to 9,000 mining jobs have been lost in New South Wales and Queensland. Based on current press coverage, those numbers look like they are about to rapidly increase.”

Many are saying that Australia’s resource boom is over, and there are fears of how well it will handle a transition to an economy that isn’t driven by mining. Australia’s economy only grew by 2.5 percent in the first quarter of this year, below its decade-long average of 3 percent. Right now, its non-mining economy remains fragile, and if demand for raw materials decreases, Australia has little to fall back on.

Australia is in an especially difficult position because China is Australia’s biggest trading partner. The Wall Street Journal quoted Greg Gibbs, a currency strategist at rbs in Singapore, as saying, “‘If a China financial crisis evolves’ the Australian dollar is at risk of falling to us$0.70.” Right now it is trading at us$0.92, the lowest it’s been in 2½ years.

While Australia has profited from China’s rise for the past few years, the Trumpet used Bible prophecy to predict in 2008 that Australia’s natural resources weren’t a guarantee against recession:

The average Aussie may think the massive demand for Australia’s raw materials will bail the country out of any economic hole into which it risks sinking. On the surface that may appear to be so—as long as the demand is spread across a number of customers and as long as the strength in demand continues. Australia’s problem with this is that it has too few eggs in too few baskets.

Continue to watch as China’s slowdown exacerbates the shrinking of Australia’s economy. As the Trumpet wrote last year, Australia is “passed the point of no return.” To understand what’s in store for Australia, be sure to read Australia—Where to Now?