The world does not need a China slowdown right now

After multiple interest rate hikes and hints of waning demand from key export markets, the Chinese economic boom is probably slowing faster than many traders would like.

On Wednesday, Beijing will report its latest gross domestic product numbers and the markets are braced to see a headline number of 9.3% growth.

While that would be a spectacular prize in any of the world’s developed economies — U.S. GDP is growing at an annualized rate of only 1.9% — anything lower has the potential to spook traders.

JustĀ six months ago, the markets were confident China’s already bustling factories were expanding at a rate of 10%-plus a year.

Now, any print less than the 9.7% that Beijing reported last quarter will indicate growth is definitely cooling, and the rest of the world is a tough place right now.

Look at the problems Europe is having. Germany is enjoying the lowest unemployment since 1992 — since shortly after reunification — and would love to keep euro interest rates rising.

The European Central Bank is complying, but while this is a good move for the Germans, it is only deflating the markets around the euro zone’s edges.

Essentially, by raising rates, the ECB is giving European banks enough time to prepare for a default on Greek bonds and perhaps one or more copycat failures as well.

We have always said that China is in control of the game.

Their campaign of interest rate hikes and other measures has hit the brakes on money flowing through their economy, drying up sources of cheap credit and making it harder for Chinese businesses to expand.

This is a good move for Beijing, which sees inflation as public enemy No. 1.

But manufacturing has shown signs of slowing in Europe — yes, even in Germany — and Japan as well.

And as of last month, inflation in China was still getting worse, not better.

Arguably inflation and renewed growth may be better than the prospect of inflation and declining growth, the dreaded “stagflation” that afflicted the U.S. in the 1970s.

The question is whether Beijing could restart their growth engines even if they wanted to.

In any event, a bad number on Wednesday could get traders looking for the exits on China funds from FXI (quote) on down:

And since China is the big growth driver for the world right now, trouble for FXI could mean a bad day for global funds such asĀ EEM (quote) — in short, for the entire emerging markets asset class.

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