‘Extreme’ US-China decoupling could cost US$2.5 trillion in equity, bond sell-off: Goldman

A decoupling between the world’s two largest capital markets could cost US$2.5 trillion in an extreme scenario, as investors from the US and China are forced to divest their holdings of equities and debt instruments, according to an analysis by Goldman Sachs.

US investors could be forced to sell nearly US$800 billion of Chinese stocks trading on American exchanges in case of a decoupling, the US investment bank’s analysts led by Kinger Lau and Timothy Moe said in a report on Monday. On the flip side, China could liquidate its US Treasury and equity holdings amounting to US$1.3 trillion and US$370 billion, respectively.

The sell-off was based on the assumption that US investors would be restricted by US regulations from such investments, they said.

The risk of US-China decoupling has shown signs of spreading beyond trade after Treasury Secretary Scott Bessent said the option of delisting US-traded Chinese companies was on the table amid a tit-for-tat tariff war between the two nations. The Trump administration has slapped a 145 per cent duty on exports from China, while Beijing has struck back with a 125 per cent levy on all US imports and another 20 per cent on selected American goods.

“In the capital markets, equity investors are very focused on the renewed risk of Chinese ADR [American depositary receipt] delisting,” Goldman analysts said in the report.

Trader Peter Michael Tuchman reacts as he works on the floor of the NYSE on Friday. Photo: Agence France-Presse

Should the threat become a reality, it will affect nearly 300 companies, including some of China’s biggest technology companies. As of March 7, 286 mainland Chinese companies were listed on the New York Stock Exchange (NYSE), the NYSE American and the Nasdaq, with a combined market capitalisation of US$1.1 trillion, according to the US-China Economic and Security Review Commission.