China’s Stock Market Crash Nothing To Fear 

Photo by Aaron Goodman

Photo by Aaron Goodman

Worries about a slowing Chinese economy and declining Chinese yuan are often cited as major reasons for the recent decline in the U.S. Stock Market, but is this really something U.S. investors should be worried about? Let’s look at a few facts:

Exports to China amount to about 7% of total US exports and less than 1% of GDP. American multinational companies derive only 2% of their net income from China. Even if growth in China slows to 5% or less, the country is still growing and will continue to do so for years. China is an important trading partner, but their direct impact on our economy remains relatively small.

The US imports more goods from China than from any other country. Because the Chinese yuan is falling in value, those goods coming from China are getting cheaper to buy. That is good news for US consumers.

 As the Chinese economy slows, it decreases worldwide demand for energy, raw materials, and industrial metals resulting in a decline in price of those commodities. This holds down inflation and makes raw materials cheaper for American manufacturers, resulting in stronger corporate profits and cheaper goods for consumers.

Worries about China have been overblown. The effect of a Chinese slowdown is more psychological than anything. Stick to your long-term investment plan and ignore those headlines. Our economy is doing just fine.

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