China is admitting a recession in the US would be a significant enough drag to badly damage its exports and undermine its GDP growth. "If U.S. consumption really comes down, that’s bad news for us. That will have a pretty severe impact on our exports," Zhang Tao, deputy head of the international department of the People’s Bank of China told a group including Reuters.
Any slowdown will hit the Chinese stock markets hard. Despite a recent pullback, the Hang Seng Index is up over 60% in the last two years while the S&P has barely risen. The Shanghai Composite is up over 300% during that period.
Downward pressure on China shares could affect many stocks listed in the US. Among the most vulnerable are probably those which have risen the fastest. That would include Baidu (NASDAQ:BIDU), which is up about 130% in the last year and China Petroleum (SNP), which is up 50%.
If the US economy has a major slowdown, the Chinese markets may have posted tops which they will not see again for years..
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