China stocks sink on trade war fears; Hong Kong dives 10%

(Updates market levels, share price moves and context)

SHANGHAI, April 7 (Reuters) - Hong Kong and Chinese stocks dived on Monday as markets around the world crumbled in the face of a widening global trade war and fears it will unleash a deep recession.

Hong Kong's Hang Seng index slumped more than 10% in morning trade which, if sustained, would make for the benchmark's largest daily fall since the 2008 global financial crisis.

Banking stocks collapsed, with Hong Kong-listed shares of HSBC and Standard Chartered tumbling 15%.

China's CSI300 blue-chip index fell more than 5% with selling in nearly every sector. China's yuan slipped to its lowest since January and bonds rallied sharply.

China, which is now facing U.S. tariffs of over 50%, responded in kind on Friday by slapping extra levies on U.S. imports.

The intensifying spat between the world's two biggest economies threatens to upend trade flows, and besides hitting Chinese earnings, it is also expected to drive a slowdown in global demand at a time of stuttering growth in China.

Mainland indexes of solar companies and household appliance makers notched losses around 10%. The Hang Seng volatility index shot to its highest since October.

In the absence of any hint of a backdown from the White House, the focus for investors will be on Beijing to come up with measures to support Chinese exporters and shore up the domestic economy.

Shares in online giants Alibaba ( BABA ) and Tencent ( TCTZF ) were down more than 8%. (Reporting by Shanghai Newsroom; Editing by Kim Coghill and Shri Navaratnam)