The author is a Reuters contributor. The opinions expressed are his own.

NEW YORK - Everyone's obsessed with the euro zone these days, and every little rumor sends global stock markets into wild gyrations. But here's a little secret: If you really want to know what could blow up your portfolio for years to come, forget Europe. What you should really be concerned about is a potential Chinese bust.

Investors have long taken for granted the growth of China's eye-popping gross domestic product, and indeed the nation's emergence has been one of the most stunning stories in economic history. But recent numbers show some widening economic cracks: The Chinese stock market is near its two-year low; third-quarter GDP growth slowed to 9.1 percent, a continued deceleration after years of double-digit gains; and the government's stockpiling of foreign-exchange reserves has been slowing to a crawl.

Some of the leading indicators, including credit growth and property sales, have shown signs of weakness in recent months, says David Cui, a China strategist at Bank of America Merrill Lynch Global Research who was ranked first in Institutional Investor's 2011 All-China Survey. As a result, we believe the risk has risen considerably. Many of these risks are intertwined -- which makes any outbreak anywhere dangerous.

Ah, real estate. Just as it took down the American economy, now it has the potential to do the same for our friends across the Pacific. Bearish observers single out the twin trends of easy credit and rampant overbuilding -- sound familiar? -- that have led to ghost cities, a blizzard of new developments and skyscrapers that have been erected and now lie virtually empty.

Surely that can't be sustainable. Some Chinese officials have talked smugly about having abolished the usual business cycle of boom and bust, after 30 years of impressive growth. But no country is immune to economic troubles, and sooner or later, China's engine will start to sputter.

One investor on the front lines of a potential Chinese slowdown is David Fedirchuk, a Canadian filmmaker living in Sydney, Australia. Although he considers himself only a small-time stock trader, as he starts amassing retirement savings for his growing family, the married dad of two is very worried about what's coming down the pike.

A Chinese bust would be devastating, says Fedirchuk, 40, who runs a production company called Mum's Spaghetti. Right now the mining sector is keeping Australia afloat, and if China no longer gobbles up resources, we have only ailing retail and manufacturing sectors to rely on.

That's why, like any good chess player, Fedirchuk is already thinking a couple of moves ahead. A Chinese slowdown would likely lead to a Sydney property bust -- which is why he's already put his home on the market.

But back here in the States, what's an investor to do? After all, the U.S. is China's largest trading partner, with $385 billion in two-way trade in 2010, an almost 30 percent jump in a single year. We're also its largest export destination, and its fourth-largest source of imports. Sorry to say that if the Chinese economy goes down hard, there won't be many places for equity investors to hide.

That said, here are a few ways worried investors could adopt a defensive crouch:

HEDGE YOUR BETS

I would be looking to the options market on ticker FXI (Ishares Xinhua China 25 ) to hedge an existing exposure directly, or to initiate a short exposure, says Stephen Solaka, managing partner of L.A. money managers Belmont Capital Group. So if you were long FXI, I would 'collar' the position. Collaring is a put option that protects your shares from large downward moves, thereby locking in profits.

KNOW YOUR MULTINATIONAL

Some companies are more exposed to the Chinese market than others. Miners like Freeport-McMoRan , heavy machinery producers like Caterpillar , major importers like Wal-Mart , automakers like General Motors and restaurant companies like Yum! Brands have all benefited from the Chinese boom -- and would be vulnerable to a slowdown.

AVOID SPECULATING

Most mom-and-pop investors shouldn't be trying to pick individual stocks half a world away, especially when strong winds are gathering. Be especially careful, says Bank of America's Cui, when investing in banks, property and investment-led sectors including resources, steel, cement, machinery, contractors and dry bulk shipping. If you don't want to give up your exposure to the massive Chinese market - after all, 9 percent annual growth still sounds pretty stellar to American ears -- a broad-based mutual fund like Matthews China (MCHFX) should at least cushion your investment from plunges in individual stocks and sectors.

(Editing by Jilian Mincer and Beth Gladstone)

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