Here's the story: BEIJING (Reuters) - China's central bank on Sunday 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 U.S. consumption weakens, Zhang Tao, deputy head of the international department of the People's Bank of China, told a financial forum. Figures due this week are expected to show that China's gross domestic product grew more than 11 percent in the fourth quarter of 2007 from a year earlier, despite a deepening U.S. credit crunch. But Zhang said he saw mounting risks to U.S. consumer demand. He noted that retail sales unexpectedly fell 0.4 percent in December, while property prices were falling and rising petrol prices were crimping disposable incomes. "If U.S. 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 U.S. demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said. "Global demand is ultimately driven by the United States," he said. More U.S. interest rate cuts or a further fall in the dollar in response to a weakening economy would have an impact on Chinese monetary policy, Zhang said without elaborating. He said the subprime crisis would not divert China from the path of financial innovation. "It will not change our general direction. 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. Dai Genyou, director of the central bank's credit bureau department, said higher Chinese interest rates would have little impact on the ability of companies to service their debts. Nor would they derail corporate investment plans, Dai said. (Reporting by Langi Chiang; Editing by Alan Wheatley & Lincoln Feast) Copyright 2008 Reuters ______________________________________________ Very interesting. It's certainly one of the make or breaks for the world economy. I think a lot of people have hung their hat on the notion that the world economy will not slow down if the U.S. slows down. Who knows, maybe it won't. This may impact negatively on all the BRIC stock exchanges or anything that has to do with commodities.