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 G7 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 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.
"And 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," they said.
Added Morgan Stanley chief economist Stephen Roach, "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."
The Chinese government late last month ordered that no approvals for new steel, aluminium 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 (
Still, the question of a slowdown on China's trading partners a concern in the US. 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," he said.
Nonetheless, some economists are saying the US should be prepared for the worst.
Subbaraman and Llewellyn cited "a significant risk -- say one in four -- of a hard landing" for China: "Whatever the outcome, it will impact most on Asia ... Beyond Asia, it would likely have mixed effects. Slower US and European exports would be unlikely to harm either region much; and global commodity prices could ease somewhat."
But the Lehman report said that if China were to suffer a hard economic landing, "we estimate that the rest of emerging Asia's GDP growth would drop by 3 percentage points, while Japan's growth would be half a percentage point lower enough to derail the fragile recovery in Japan's economy, and keep the deflation going."
"Should China's economy falter, the rest of the world would suffer," said Sung Won Sohn at Wells Fargo Bank.
Moreover, Sohn said China has little experience dealing with boom-and-bust cycles, "increasing the probability of an accident." Raising interest rates, he said, "could further attract speculative inflows of hot money into China."
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