A Chinese Economic Crisis: A Threat to World Financial Markets

As the US looks inward in advance of the upcoming presidential election, another factor largely beyond our control is looming on the horizon–or perhaps OVER the horizon.

While economists and political pundits in America debate the health and outlook of the US economy, the Chinese economy is quietly falling into crisis. Because the Chinese economy has been an engine of growth for the global economy, a severe slowdown in China poses a serious threat to world financial markets. Many companies whose stocks trade publicly on exchanges from Shanghai to Sydney to Tokyo to New York to London have major interests in China. A recession in China will severely impact those companies and thus world stock markets.

During such a scenario, at the outset, gold may be temporarily hurt by interrupted Chinese demand, but over the long-term, gold investments tend to move independently of stocks, making them an ideal way to hedge your portfolio from any scenario that threatens world stock markets.

http://www.businessinsider.com/chinese-hard-landing-2012-9

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