Cramer: Could China Derail US Recovery?

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Sure China is a big influence on the market, but is it so big that it could take down the US?

That's a question currently being kicked around by almost every pro on Wall Street, Jim Cramer included.

Talk of a hard landing has escalated in recent days, after new data showed that China's factory activity weakened to a nine-month low in June, heightening the risk of a sharper second quarter slowdown.

And there are a growing number of reports which suggest China is facing a credit bubble that's 'unlike anything in modern history.'

If China really stumbles, which American companies are likely to get dinged? Cramer investigated. Following are some of the more likely casualties

As you might expect, the industrial sector appears vulnerable. "Caterpillar benefited substantially from China's orders for earth movers and excavators," Cramer said. "And Cummins has a significant presence in China. A problem could be devastating for either of these two firms." Also Cramer said declining demand from China could ripple across United Technologies, Boeing and General Electric – that is, they also rely on orders from China.

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Coal stocks could also take it on the chin. The belief was that as China grew industry, they would buy more and more coal for power. Therefore, Cramer believes Arch Coal, Peabody and Walter Energy could be at risk. And the impact would hardly be limited to coal. Other raw materials producers including Aloca and Freeport McMoRan could be also be facing trouble.

Cramer also expects a slowdown in China to stifle apparel makers with Nike and Coach among the more compromised. "We also know that Yum! Brands had a decline in its Chinese business—I find that very worrisome, too," Cramer said. And Cramer is also worried about General Motors. "That company has moved so aggressively into China it might as well call itself General Tso."

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Technology is far from safe. "A key to Apple's iPhone success is the potentially massive deployment of smartphones is China," Cramer said. A downturn could be devastating for Apple.

Problems in China could even ripple across the perceived safer stocks such as Procter & Gamble, Coca Cola, PepsiCo and General Mills. "They've all done their best to get into the China market," Cramer said.

Even casinos could get hammered. "Las Vegas Sands and Wynn have both made a huge bet on China. But if the big Chinese gamblers seem all gambled out, then hearing about a potential slowdown in China could be enough to crush these casino stocks."

What's the takeaway?

Without China, at best, it would be difficult for US stocks to rally.

"This list is hardly comprehensive, but it shows that if China stumbles, weakness could ripple across a wide range of stocks and sectors. And these are just the stocks we know about," Cramer said.

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