By Jens Erik Gould From The Financialist

What’s the greatest risk to the global economy in 2015? Europe’s stuttering economy is a big one. Ever-present geopolitical risk is another. But the possibility of a hard landing in China looms largest. Long-running concerns still remain: oversupply in the housing market, the heavy debt burden of credit-fueled growth, and investment as a share of GDP that’s more than twice as high as the developing world average. And new concerns continue to pile up: housing prices have fallen for six months in a row, near-record capital outflows, and deposit growth is currently running close to a record low.

“The backdrop of the triple bubble in housing, credit and investment remains the same as a year ago, but many other factors are in our view worse,” Credit Suisse analyst Andrew Garthwaite wrote in a recent report. In other words, the chances of a sudden and significant drop in China’s growth rate remain significant and might even be growing. And what might the result of such a drop be? In particular, which countries, markets and companies stand to lose the most?

Australia, for starters. Approximately one-third of the country’s exports, worth 5 percent of GDP, are shipped to China. Already, with China’s growth slowing and global metals prices falling, capital expenditures among Australian mining companies are expected to decline to half of their 2012 peak, according to Credit Suisse. With an unemployment rate already higher than in the U.S. and U.K., Credit Suisse expects Australia’s central bank to attempt to stoke the economy through rate cuts, and forecasts cuts in the benchmark rate from 2.5 percent to 1.5 percent this year. That, in turn, would further weaken the Australian dollar, which has already fallen from US$0.94 in December to US$0.81 currently.

Certain commodity prices are also heavily dependent on Chinese demand, in particular copper and aluminum. In the event of a Chinese hard landing, according to Credit Suisse, copper could tumble to $2 per pound (from $2.48 currently) and aluminum could fall 20 percent (from $0.80). At those prices, 30 to 40 percent of global production would find itself with costs above market prices. Carbon steel is also particularly vulnerable since China’s own steel production is increasing, crowding out the need for as many imports.

When it comes to specific industries, German car companies are surely watching Chinese economic numbers with particular interest. China accounts for a remarkable 30 percent of the German automotive industry, and 35 percent in the case of BMW. That’s because German cars fetch much higher prices in China—50 to 100 percent above their prices in European markets in Europe—and even higher margins exist in the spare parts market. A sharp slowdown in the Chinese economy would slow German exports. What’s more, Chinese automakers are already taking more of the domestic market share as the quality of their automobiles improves.

Equities investors should keep an eye out for stocks with heavy China exposure, , including several Australian banking and retail companies, metals suppliers from Norway, Germany and Chile, mining equipment companies, and the German auto industry.

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