Will China Save the World?

China won't save the world

D'oh! I feel kind of stupid for asking.

You've probably heard of the butterfly effect - inspired by legendary sci-fi writer Ray Bradbury back in 1952 - which posits that minute changes in one place can lead to massive impacts elsewhere, as when a fluttering insect triggers atmospheric disturbance that causes a distant tempest.

But what if the butterflies are all contained in some sort of global butterfly net?

In Hong Kong last week, CLSA's chief economist Jim Walker issued a new warning, predicting that "butterfly wings in America's unfolding subprime-debt debacle ... will blow like a hurricane through China's rust belt."

It is a Made in China butterfly net though. Surely it will hold up even as the winds pick up.

Five months ago, a Merrill Lynch report on Japan was titled "Smiles and Enthusiasm." Earlier this month, the header from the same Merrill economist was "Nightmare," as the country slipped into negative growth.

Yeah, but five months is an eternity. I want to know what the economy will do between 9:47am and 9:49am tomorrow.

Could China be next? Walker predicts that growth may shrink from 12 to 5 percent by the end of next year, as the downturn in developed countries takes its toll on the Chinese rust belt.

Again with the rust belt talk? What is this guy's fascination with iron and water?

"This is the biggest credit crunch we've ever seen," says Walker.

But this is one of the biggest booms we've ever seen. Has Walker thought of that? You'd have to go all the way back to the Japan in the 1980s to see its equal.

"It's shockingly similar," says Richard Katz...

Oops. My bad.

What's clear is that butterflies in the United States still have the power to stir up global tempests from which no country is sheltered.

Only a pessimist would say that. An optimist would mention that we're still exporting butterflies! Woohoo!!