Many large Chinese investors were smart enough to sell out and take their profits in the first half of the year. But that still leaves about 100 million mostly middle-class shareholders and it's these people who Australia and New Zealand are hoping will continue to drive consumption and underpin many of our exports.
The risk is they lick their wounds and stop spending, with obvious implications for Australia's (and New Zealand's) agricultural, education and tourism exports.
As of Friday, about A$3.9 trillion ($4.32 trillion) had been wiped off the value of China's stock market - that's a lot of cheese, English lessons and Gold Coast holidays.
There will almost certainly be a spill over into the Australian property sector. In recent years we've seen Chinese investors buying apartments from property developers as a way of parking some of their cash. In inner Sydney and Melbourne there are whole buildings where most of the lights never go on at night because they've been bought by Chinese, who don't rent out their investments to tenants so they remain "new".
Those investors could decide they want their money back now, and start selling. And many of the developers leading Australia's apartment construction apartment boom are listed on the Chinese share market. They are heavily indebted and will be hit hard by any slowdown in demand for apartments, with the prospect that some will sell off sites and walk away from developments.
However, some of the perennially optimistic characters in the property sector are taking the counterview - as the Chinese sharemarket continues its plunge there'll be a "flight to safety" into stable assets like Australian housing. That presupposes there's still a lot of cash sloshing around after the sharemarket rout.
The iron ore price has already been hit by the fall. True, it has been dropping for months, even as Chinese stocks surged, but last week it plunged 11 per cent to a 10-year low in a single day, most likely due to concerns that China's growth will slow further.
In fact, cabbage is now more expensive than steel in China. Despite a water content of more than 90 per cent, cabbages were pricier by the tonne than the most popular type of steel, known as hot-rolled coil steel, according to commodity price index publisher Platts.
It's hard to assess how bad the effect of the sharemarket drop will be. The Chinese financial system is opaque to say the least. Its huge "shadow banking" system, started to get around government-imposed controls, isn't measured. So no one really knows how deep into debt Chinese investors have gone to cash in on the sharemarket boom.
The risk is that it leads to contagion of the rest of the financial system and the Chinese economy itself. That's when Australia would really feel pain. China is our biggest trading partner - a broad slowdown in the Chinese economy would hit Australia's struggling economy very hard.
The Chinese have always taken a much more long-term view than we do. It was, after all, Chinese premier Zhou Enlai who when asked about the effect of the 1789 French Revolution nearly two centuries after it took place famously said: "It's too early to say."
It's also too hard to know how the current crisis will end. But we should remember the long-term China story remains intact. The Chinese economy is urbanising and switching from export-led growth to consumption and the middle class will continue to grow as well as their desire for Western goods and products.
The current sharemarket ruckus won't derail the Chinese economic miracle in the long run. But there will be some pain along the way.
