Goldman Sachs (GS, Financial) has issued a stark warning about the financial fallout that could follow a full-scale economic decoupling between the U.S. and China. In what it calls an “extreme scenario,” the investment bank estimates U.S. investors could be forced to offload as much as $800 billion in Chinese equities.
The analysis comes amid heightened trade tensions and rising concern over the potential delisting of major Chinese firms from U.S. stock exchanges. According to Goldman, U.S. institutional investors currently hold about 26% of Chinese American depositary receipts (ADRs) by market cap and have exposure to $522 billion in Hong Kong-listed shares — roughly 0.5% of China's total equity market.
If financial restrictions tighten, investors could face new limits on trading Hong Kong stocks, particularly in cases involving companies like Alibaba (BABA, Financial), which may risk involuntary delisting.
Goldman also warns that a financial split could spark sharp market reactions, with ADRs potentially dropping 9% in value and the MSCI China Index sliding 4%. On the other side, Chinese investors might need to liquidate $1.7 trillion in U.S. financial assets, including $370 billion in stocks and $1.3 trillion in bonds.
The report underscores the deep financial interdependence between the two economies—and the risks if that link unravels.
