KEY POINTS:
China's central bank has poured cold water on the idea that the country's economy can decouple from the United States.
China's exports will be badly hit if US consumption weakens, Zhang Tao of the People's Bank of China, said.
Figures due this week are expected to show that China's gross domestic product grew more than 11 per cent in the fourth quarter of 2007 from a year earlier, despite the US credit crunch.
But Zhang said he saw mounting risks to US consumer demand. "If US consumption really comes down, that's bad news for us," Zhang said. "That will have a pretty severe impact on our exports."
Wang Jian, head of the China Society of Macroeconomics, agreed that China's growing trade with Europe was unlikely to insulate it from a drop in exports to the United States. If US demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said.
More US interest rate cuts or a further fall in the dollar would have an impact on Chinese monetary policy, Zhang said. He said the sub-prime crisis would not divert China from the path of financial innovation.
"However, it serves as a warning that we need to pay attention to risk controls and launch new businesses in a steady, orderly way," he said.
- REUTERS
