Goldman Sachs estimates that in the “extreme scenario” of decoupling between the United States and China in finance, American investors may be forced to sell about $800 billion worth of Chinese stocks.
With concerns about the prospects of financial decoupling between China and the US, Goldman Sachs is joining the ranks of some global banks in evaluating the worst-case scenario facing investors. According to a report released by Goldman Sachs analysts on Wednesday, currently, US institutions hold about 7% of the market value of Chinese company American Depositary Receipts (ADRs), and these institutions may not be able to trade in the Hong Kong market. This means that if companies like Alibaba Group were to face delisting in the US, such investors would not be able to turn to Hong Kong to buy stocks.
Goldman Sachs data shows that US institutional investors currently hold about $250 billion in Chinese concept stocks, accounting for 26% of the total market value. Their holdings in Hong Kong stocks amount to $522 billion, representing 16% of the total market value of Hong Kong stocks. The holding proportion in the A-share market in China is about 0.5%. In total, the value of these Chinese stocks exceeds $800 billion.
In an interview with Bloomberg on April 14, US Treasury Secretary Scott Bessent stated that “decoupling is not inevitable, but it is possible.”
Previously, concerns about Chinese companies being kicked out of the stock market had already existed during Trump’s first presidential term, and Bessent recently stated that in trade negotiations with Beijing, all options are “on the table.” On April 9, Bessent mentioned that with the escalation of the US-China trade war, if Beijing does not make concessions, the US does not rule out the possibility of delisting Chinese concept stocks from US exchanges.
According to Bloomberg, Goldman Sachs analysts wrote, “The extreme uncertainty of the global trade system has led to dramatic fluctuations in the global capital markets and raised concerns about the risk of decoupling between the world’s two major economies in global economic recession and other strategic areas.” They estimate that in the case of forced delisting, the valuation of ADR and the MSCI China Index may drop by 9% and 4% respectively from their current prices.
Goldman Sachs estimates that US investors may only need one day to complete the sale of A-shares, while exiting Hong Kong stocks and American Depositary Receipts (ADRs) would require 119 days and 97 days respectively.
Meanwhile, Goldman Sachs stated that in the same extreme scenario, Chinese investors may need to sell their financial assets in the US, with a total amount possibly reaching $1.7 trillion, of which about $370 billion is in stocks and $1.3 trillion in bonds.