The news recently has been full of stories about China’s mounting troubles. Youth unemployment is skyrocketing. At least one very large real estate company is bankrupt. Chinese debt is high and confidence is low. They seem headed for a recession, or worse.

‍

As the second largest economy in the world and the United States’ largest trading partner, many people are understandably worried. How would an economic crisis in China affect us here in America?

‍

If we look past the attention-grabbing headlines, there is actually little reason to expect that China’s troubles will substantially spill over into America.

‍

Not many experts have been weighing in on exactly how they think a crisis would play out, but New York Times columnist (and Nobel Laureate in Economics) Paul Krugman recently pointed out why China is less likely to drag down the US economy than you would think.

‍

Asset prices in China have been falling and probably haven’t hit the bottom. But the total amount of American capital invested in China is estimated at around $500 billion. That seems like a lot of money, but office real estate in the US is worth $2.6 trillion. US financial markets are worth many tens of trillions of dollars. Even steep losses in China would be small by comparison.

‍

Even a severe recession in China is unlikely to interrupt our access to cheap manufactured goods. If anything, a crisis in China may lower prices and help tame inflation here. There’s no reason to think our supply chains are more at risk than they were before.

‍

In recent years, we’ve dealt with the pandemic, inflation, and now high interest rates. Despite all of it, the US economy remains resilient and strong. We have the most productive and innovative economy in the world. I don’t think a Chinese crisis will change our strong fundamentals.

‍

When it comes to medical office buildings, it’s even more clear how little China matters. The US medical industry does not serve the Chinese market in a meaningful way. Americans will still need care, and the medical businesses that serve them will keep doing what they do, including paying their bills.

‍

Of course, I will continue monitoring developments to make sure that Alliance is the best possible steward for our investors’ capital. But there’s no need for undue worry. There are still great deals out there, and we’re going to find them.

‍