OREANDA-NEWS. U.S. corporates with China exposure will not be uniformly affected by slowing Chinese economic growth. Those with exposure to end users are better positioned than those providing input for re-export or property development, according to Fitch Ratings.

We believe, on whole, U.S. based corporations have manageable direct exposure to China's slowing economy. U.S. sectors that have considerable direct ties to Chinese exports include agriculture, airspace, autos, chemicals and semiconductors. Exports to China were $124 billion in 2014, which is less than 1% of U.S.'s $17 trillion GDP.

Despite the considerable challenges for China, there appear to be sufficient policy levers available and enough diversity in growth drivers to avoid a hard landing in 2016. Central government spending has recently accelerated rapidly, and infrastructure investment, which accounts for a similar share of overall fixed asset investment as the real estate sector, continues to grow swiftly, supported by stepped-up financing from the policy banks. Consumer spending growth indicators have held up well so far (and are corroborated by the reported strength of Chinese tourism demand around the rest of Asia), and labor market conditions have not suffered any major deterioration. Fitch forecasts 6.2% GDP growth for 2016 relative to the government's target range of 6.5%-7%.

In the metals & mining sector, China's exports of its excess production have resulted in globally weak prices for steel and aluminum producers and regional consolidation in those industries. U.S. Steel has been shrinking its footprint as well as seeking trade remedies to cope with import competition. Alcoa has been curtailing smelting and refining capacity while growing its aerospace and automotive exposure. U.S. coal companies that levered up for metallurgical coal acquisitions in 2011 have been in a death spiral from weak domestic demand, strong dollar and precipitous drop in metallurgical coal prices driven, in part, by the slowdown in China. In particular, 26% of U.S. coal production in 2013 was mined by companies that have recently filed for bankruptcy and a further 19% was mined by Peabody Energy, which is near default.

In the chemicals sector, U.S. companies' direct exposure to China is limited, but competition from excess supply of agricultural chemicals or construction chemicals, such as urea, glyphosate, polyvinyl chloride (PVC) and titanium dioxide, can weigh on prices. Westlake Chemical discussed the potential for China's PVC costs to drop further with a weaker yuan and excess domestic coal supply in its 4Q15 earnings call. However, companies with exposure to packaging or consumer products are benefiting from the growth of China's consumer sector. In particular, in its 4Q15 earnings call and release, Dow stated that China remains a bright spot on consumer driven demand and greater China saw 10% volume growth in 2015.

General Motors (GM) and, to a lesser extent, Ford have sizable exposure to China. Auto sales got a big boost in 4Q15 when the government reduced the purchase tax on smaller vehicles by 50% following a steep falloff that coincided with stock market volatility. However, Fitch has concerns that the stimulus may have pulled demand forward, which could lead to a sales decline in 2017 if the stimulus is not extended. GM sold 3.7 million vehicles in China in 2015, up 5.4% from 2014 and equal to 37.4% of its global sales volume. China makes up a smaller portion of Ford's business, accounting for only about 17.5% of the company's unit sales, but it is a key driver of global growth for the company.

U.S. casino operators have notable exposure to Macau, which derives the majority of its casino resort patrons from mainland China. These include, in order of exposure, Wynn Resorts, Las Vegas Sands and MGM Resorts. 4Q15 casino revenues declined 27%, with much of this decrease related to the corruption crackdown initiatives on the mainland. Visitation from the mainland was down a more manageable 4% in 4Q15, and 2016 is off to a better start. January visitation from mainland was virtually flat, down 0.7% from prior year. More importantly, the average length of stay of visitors increased to 1.2 days from 0.9 day a year ago, a sign that the market is attracting a higher quality customer mix.

Consumer oriented sectors not as exposed to the corruption crackdown are faring much better. Yum! Brands! China division, which operates 7,176 restaurants, opened 384 new restaurants in 4Q15 and saw 2% same-store-growth. Yum's China division accounts for more than half of Yum's revenues and is being spun off in 2016. Apple sold 18% more iPhones on the mainland during 4Q15 relative to the past year.

Notwithstanding the direct exposure to exports to China, a sharper downturn in China's economy relative to Fitch's orderly deceleration base case could trigger a ripple effect on global demand. In the bear case, the U.S. remains out of a recession with growth slowing by 0.9% in 2016 compared to Oxford Economics' base case, according to our China Slowdown Scenario report. However, U.S. shipping, materials, commodities and industrials would be especially exposed, according to a survey of Fitch's U.S. Corporates analysts.