Be afraid. Be very afraid. The Chinese financial system is facing its very own version of a credit crunch that could rival the global events of 2008 and 2009.
The country's creaking banking system has thrown up what must surely be a unique phenomenon in world finance - a situation where real banks are increasingly unwilling to lend money for capital investment, while a huge industry of "shadow banks", unregulated and unaccountable, are supplying up to a third of the credit requirements of Chinese industry and consumers.
It is a threat highlighted recently in two reports. The first, by the ratings agency Fitch, warned of systemic risk from the "Wild West atmosphere" in Chinese financial markets. The second, from the top people's bank Coutts, spoke of the need for a massive injection by the Chinese government into the banking system, and a wholesale "renationalisation" of the Chinese financial industry.
If the new regime of president Xi Jinping does not act urgently to tackle the problem, perhaps with as much as US$7 trillion worth of new capital, it could spell global financial chaos and severely knock the growth prospects of the Chinese economy - still the engine that pulls global growth.
The good news, at least according to Coutts' Gary Dugan, is that the new president will not flinch from taking on the entrenched interests of China's banking establishment, perhaps as soon as six months from now, to fix the problem.
The Chinese threat is looming large in the thinking of investment experts looking ahead to the rest of the year. Now is the time of year when they give their forecasts and investment recommendations for the second half, and it promises to be an eventful six months.
The first half was dominated by the forward march of equity markets at the expense of bonds. Shares in Japan, the United States, Britain and South East Asia all roared ahead, and even the crisis-benighted euro zone managed a better return than US 10-year government bonds, which actually lost 1.4 per cent.
The main dark spot for equities was in emerging markets, which slipped more than 3 per cent. The GCC region, incidentally, was one of the few to buck this trend, with big returns on equities, especially in the UAE.
Apart from China, the main concern of analysts for the rest of the year is whether the downwards pressure on bond prices will continue as the US central bank implements a policy of "tapering" off its quantitative easing (QE) policies.
While many agree that it's necessary for the world to wean itself off QE, the debate is how soon and how quickly the withdrawal treatment should proceed. A dose of "cold turkey" could lead to dramatic increases in yields, especially in those government issuers, for example Colombia and Rwanda, that recently tapped markets at their height.
For the GCC, the good news is that it should escape a bond bloodbath, if it comes to that. The fundamentals are more sound here, and while there will be yield rises, they will not be as dramatic as elsewhere in the world. Regional bondholders are still largely regional financial institutions, who will not be panicked into a dramatic exodus.
A dark cloud for the Middle East region is Turkey. As the demonstrations in Istanbul and elsewhere continue, economists are starting to size up the long term effects of instability in the country. Capital Economics, the London consultancy, warns of a "profound impact on economic performance" from continued disruption.
Mr Dugan is more blunt: "You should close your eyes and get out of Turkey. Investors will see dramatic losses and won't return for a long time."
So the prospects for the second half are actually pretty scary on a global scale. But investors looking for somewhere to shelter from the storm, especially those with an east Asian horizon, should look to Japan.
"Abenomics" has transformed the country's outlook after three decades in the doldrums, and even after the recent equity strength there is still good value to be had there, especially if the country's tourism market takes off.
Mr Dugan's final piece of advice to investors is: "Go on holiday to Japan and check out the equity market."
fkane@thenational.ae