By Steven Dudash

October 9th, 2015

Chinese stocks suffered an epic collapse, absorbing losses of nearly 27% during a nine-day stretch at one point in August. This, along with concerns that the broader economy in China was beginning to cool, sparked widespread contagion fears, spooking investors and roiling worldwide markets. The tremors continue to be felt today, with the Fed declining to raise interest rates last month in part due to concerns over China.

Still, China has forecasted 7 percent growth this year, a figure that has raised eyebrows among many economists, especially in the wake of a recent report indicating that Chinese imports are off nearly 14% from last year and are expected to plunge again in September. Amid waning demand, is it possible to grow the economy at that rate?

Dubious forecasts are nothing new. There have long been questions about the validity of Chinese government’s numbers, since how it calculates its economic data has always been a mystery, which is hardly surprising given that much of what happens there is shrouded in secrecy. In the past, when growth seemed unending, this lack of transparency was easier to overlook. Now that the environment is souring, other countries whose economies are more interconnected with China than ever before are starting to feel the residual pain and will eventually demand greater openness and transparency.

The problem is that China doesn’t care what the rest of the world wants and is very unlikely cave in to international pressure to conform to accepted accounting and disclosure requirements. However, what the Chinese people want is another thing. Chinese officials are far more sensitive to internal pressure than most realize, especially on economic matters.

In recent years the government has taken a series of steps to encourage more and more of its citizens to become active in equities markets, including encouraging brokerage houses to increase margin lending and investing directly in state-owned companies to artificially prop up valuations. With those markets now floundering, the public – which now has more to lose by the government fudging its numbers – could begin to pushback more forcefully, potentially resulting in less ambiguity.

So what would a more open and transparent China mean for investors? Short term, probably very little. Longer term, though, it could prove to be an enormous benefit to beaten down energy companies. One of the big reasons behind the decline in the price of oil has been concerns over the Chinese slowdown.

The problem is no one really knows for sure how bad the environment really is, and whenever there is uncertainty human emotion tends play an outsized role. In part, that has led to the huge oil selloff. There could be tremendous opportunity in the near future to snatch up beaten down energy stocks, such BP and Exxon, which have the capital to withstand prolonged downturns and now are trading at a steep discount to historical valuations, even after rallying from lows last month.

Large banks, meanwhile, present another opportunity. There is very little question that the pullback in China affected the Fed’s decision to hold off on rate hikes, which has squeezed bank profits, as margins remain thin due to artificially low rates. Bank stocks, as result, have suffered.