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Are Companies, Investors Aware of Their China Risk?

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Are Companies, Investors Aware of Their China Risk?

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Commentary The earnings of companies within the S&P 500 Index are 90 percent correlated with China’s gross domestic product growth today, according to Bank of America analysts. In 2010, the correlation was zero. That’s an astounding statistic. It’s not unfathomable once you dive into what it means. The S&P 500 consists of the 500 largest U.S.-based publicly traded companies. Companies of this size—think multinationals such as Intel and Starbucks—will have generated sales from Chinese customers. One can’t become the 500 largest without operating in the world’s No. 2 economy. It does raise a question: are companies equipped to manage risks of operating in China, and are they adequately disclosing such risks to investors? Ten years ago, the Chinese market was immaterial to corporate revenues. Today, it’s a major driver. China is a market with unique risks. They pose real challenges for companies and shareholders. Shares of casino operator Wynn Resorts …

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