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US Slowdown Would Have Limited Impact on China
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A slowdown in the US economy would have only a minor impact on China if it were moderate, economists have said.


Even in the face of an unexpectedly rapid drop-off in the US, China would still be able to grow at the desired level by introducing measures to stimulate the domestic economy, they said.


The US is China's top export market. However, at a time when it is trying to rebalance its economy away from investment and exports and towards domestic consumption, "some slowdown in exports may, in fact, be beneficial to China," said Bert Hofman, lead economist at the World Bank's Beijing office.


The International Monetary Fund last week predicted that the US economy, which has been grappling with problems in its housing sector, would grow by 2.2 percent this year, down from 3.3 percent last year.


Of course, a malaise in the US economy would not be good for any of Asia's economies, many of which rely on US trade for economic growth.


However, losses from a decelerating US economy could be somewhat offset by gains from Europe and Japan. Germany, the leading European engine, is expected to grow by 1.8 percent this year, up from 1.3 percent in 2006, while Japan's rate could increase to 2.3 percent from 2.2 percent, according to the IMF's latest World Economic Outlook.


China, which has been experiencing growing domestic demand, could also help cushion the impact of an American cool-down on the rest of Asia, economists said.


As for China itself, "it is less sensitive to the US economy than many other East Asian countries," said Hofman.


Qi Jingmei, an economist with the State Information Center, echoed Hofman's comments, saying she did not foresee a major spill-over from the US to China.


"Slower exports to the US are not necessary a bad thing," she said.


The global economy usually closely tracks changes in US growth rates. However, while the US economy was slowing last year, the rest of the world picked up, a phenomenon that has stirred hot discussions on whether the rest of the world is "decoupling" from the US.


Morgan Stanley chief economist Stephen Roach said US deceleration had not had much effect on global growth mainly because the US's housing sector, which has been leading the slowdown, was mainly a domestic problem.


However, the world should be prepared for the possibility that the recession in the US housing sector could infect American consumer spending, which forms the key link between the US economy and the rest of the world, particularly Asia, Roach said.


If that happened, the world would soon feel the pinch, he added.


Although China is less sensitive to changes in the US than most other Asian economies, an unexpectedly rapid US deceleration could also affect China, said World Bank's Hofman.


China may need to turn to fiscal stimulus measures to counter that impact, he said. The country, which saw tax revenues grow by an average of more than 20 percent in the past five years, is well prepared to do so.


(China Daily April 19, 2007)


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