US economists fret over China effect
In a sign of the growing economic importance of China, a chorus of warnings is coming from US experts about the impact of what is seen as an impending slowdown in the Asian economic powerhouse.
China's economic clout has not escaped US policymakers either. US officials said last month they hoped for Chinese participation in the Group of Seven consultations of the top economic powers.
Private economists are warning that the likely cooling of China's red-hot economy will have important global implications.
"While China's GDP (gross domestic product) represented only a modest 4 percent of world GDP last year, it accounted for fully 13 percent of the world's growth," said Lehman Brothers economists Rob Subbaraman and John Llewellyn in a research note.
"China's importance in world industrial output is even greater: increasingly the world's manufacturing sector, it consumes between 20 and 40 percent of many major raw materials."
"The global impacts of the coming slowdown in China cannot be taken lightly. When today's Chinese economy sneezes, Asia and possibly even the rest of the world could well catch a cold," said Morgan Stanley chief economist Stephen Roach.
The Chinese Government late last month ordered that no approvals for new steel, aluminum and cement projects be made this year in a bid to halt "haphazard" and "redundant" investments.
In its latest attempt to cool the economy, the State Council issued a circular that also called for a nationwide examination of nearly all investment projects including commercial offices, golf courses and shopping malls.
Premier Wen Jiabao acknowledged recently that China's booming economy was at risk of overheating, but stressed his government was taking action to ensure a "soft landing."
Still, the question of a slowdown on China's trading partners is a concern in the United States. US Treasury Under Secretary for International Affairs John Taylor will travel to China this month for consultations.
Morgan Stanley economist Richard Berner says however than fears for the US economy may be overblown.
"A slowdown in China's economy would have important implications for the US economy and financial markets, just as has the Chinese boom," he said.
"But contrary to fears that a significant slowdown in Chinese growth will trigger economic and financial turmoil, I see only limited US fallout. Unless it is truly a hard landing, a Chinese slowdown would only nick US economic growth."