Call them complacent, but most analysts are confident that a big correction in Chinese stocks would have a modest impact on the world's fourth-largest economy and its banking system.
Just as a four-year bear market from mid-2001 failed to derail double-digit growth, a slump now should make little difference because equities still account for a small share of Chinese household wealth.
Investors, moreover, have not had time to adapt their spending patterns to their new paper wealth.
"This flirtation with the wealth effect has affected few locals, and it has been a factor for a few weeks. China's economic miracle predates the stock market pop, and it will survive it, too," Carl Weinberg at High Frequency Economics in Valhalla, New York.
An end to the dizzying rally was the last thing on investors' minds on May 29. On the day that state media reported that retail brokerage accounts had topped 100 million, the main Shanghai index hit yet another record. It has more than tripled in 18 months.
At the end of April, Chinese households held about 5.2 trillion yuan ($679.9 billion) in stocks, but this was only 20 percent of their financial assets. Bank deposits made up 69 percent of the total, according to Qing Wang, Morgan Stanley's chief China economist.
If the market plunged 30 percent, total household wealth would shrink by about 1.6 trillion yuan, or 7 percent of gross domestic product. In the United States, academics assume that consumers cut spending by $4 for every $100 drop in stock market wealth.
Using the same formula for China, this would translate into a drop in GDP growth of 0.2 percentage point.
However, Wang said the propensity to consume out of wealth in China - a developing country - could be much smaller. "We think this may explain in part why we have not seen a major consumption boom despite a surge in the stock market since mid-2006," Wang said in a report.
Jonathan Anderson with UBS has crunched the same numbers and reaches a similar conclusion: "There's no consumption boom to reverse, and the lack of a spending response on the way up should be reflected in the lack of a spending response on the way down."
Jim Walker, chief economist with brokers CLSA in Hong Kong, is bearish on the Chinese economic outlook but he agreed that the wealth effect of a crash now would be relatively muted.
Still, Walker said the potential for a market reversal to inflict economic damage was growing by the day: "We've got to hope that Beijing does something about it relatively quickly."
What would the impact be on China's banks? Banks are banned in theory from lending to buy stocks, but anecdotal evidence suggests many investors are diverting conventional mortgage and personal loans into the equity market.
Lending to households between June 2006 and March 2007 came to 634 billion yuan. Assuming half of the total has found its way into the stock market and turns sour due to a 30 percent stock market swoon, the resulting 317 billion yuan in non-performing loans would be only 1.3 percent of total outstanding NPLs in the banking system as of end-March, Morgan Stanley's Wang calculates.
Acknowledging that his assumptions are arbitrary, he judges that the impact on the banks - for now - would be moderate and manageable. The social implications, by contrast, could be significant. "Discontented retail investors who incur large losses as a result of a stock market correction could feel let down by the government, leading to incidences of social instability," Wang wrote.
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