People who want China to let the yuan strengthen dramatically against the dollar tend not to appreciate both the negative impact of a rapid currency rise on its economy and the negative impact of a markedly slower economy on that country’s political stability. So how will a U.S. slowdown affect China? Don Straszheim over at Roth Capital attempts to tell us:
We see real GDP slowing to 8.9% in 2008, the slowest since the 8.3% rate in 2001, and versus 2002 = 9.1%, 2003 = 10.0%, 2004 = 10.1%, 2005 = 10.4%, 2006 = 11.1% and 2007 = 11.5% (preliminary). Growth has averaged 9.7% for the last 28 years. This 2008 slowdown will make Beijing nervous and trigger new steps to address it. But 2008 growth should still be strongly positive. Most individuals will not notice a great difference if their income grows by 8% in 2008 versus growing 10% in recent years. That would still be a good bump and not the stuff of revolution and riot.