Please elaborate on the "China" risk-- wasn't sure exactly which aspect you were referring to.
I can think of two major China risks, I'm guessing you are referring to one or both of them:
- economic forcasters are saying China's economy will be slowing down, possibly sharply over the next few years. This could in turn trigger slowdowns in many other Asian economies, and collectively they would be importing less from us, hurting us that way.
- if China floats its exchange rate too quickly, they would no longer need to be net buyers of US Treasuries + Bonds, plus there are rumors they might slightly use gold or a fixed basket for foreign reserve holdings. In such a situation, this could add fuel to the fire of any US interest rate increases over the next few years. And that in turn could hurt the housing sector as well as others.
I do see these as possible dangers.. but just don't know if they would really be all that severe at least in the first case. I mean look at 1997 (?), that was like an emerging markets nightmare. In fact that whole 6 year or so period starting with Russia's default, Mexico's bail-out, leading to the Asian + Latin American emerging market collapses, then Argentina. Also, look at Japan, the world's second largest GDP zone! They have been in a recession for 12 years and yet we did well during that period. So I'm not too worried about another slowdown abroad. And even if China does slow down, Japan might be finally turning the corner as of the last 3 months or so (still too early to say). True Europe is still growing sub-average but even there, we have some small countries at least that are on fire: Estonia and Ireland come to mind.
That said, regarding case #2, I think that is much more likely as a potential severe threat.
-Taric