Fat Dragon is pleased to see the commentariat finally moving on from the hard-landing, soft-landing debate about the Chinese economy of the past year. That China's leaders have no intention of landing the economy at all this year should be pretty clear by now. If it is in-flight refuelling that is needed to keep the engine humming, then the Politburo would be more than happy to prime the pump themselves.
The aim of high-octane economic growth is job creation. About 20 million a year, equivalent to about "one Australia," as the Chinese are fond of saying, which is the number needed to keep enough new job market entrants happy and with a roof over their heads.
The ruling party has long had a pretty simple, circular formula to ensure they stay in power – 8% growth equals about 20 million new jobs, which equals job security for themselves. That is what a Chinese communist calls a virtuous circle. To be sure, the growth is uneven and of poor quality in many areas. Corruption abounds. But economic growth is allowing China to amass substantial wealth, a powerful manufacturing base and a commanding position on the global stage.
As long as the massive savings of China's thrifty citizens remain locked inside the country, courtesy of the closed capital account, then its leaders have plenty of cash to roll economic expansion inland. So what are the short-term risks and where do they lie? Fat Dragon believes they lie primarily overseas, in the US.
A US recession, which is one way to reduce that country's massive external liabilities, is one risk. Although growth of China's trade with Japan and the rest of Asia is outstripping growth of trade with the US, any sharp slowdown in America would have an immediate regional impact.
China's exports make up a substantial share of GDP and any slowing in sales overseas would feed back immediately into the local economy, and the job market.
The other destabilizing factor is the US dollar itself. China would probably be quite happy to maintain the dollar/Renminbi peg for as long as possible, but if the greenback falls (the other way to reduce US external liabilities), then Beijing's hand might be forced on the Renminbi earlier than Chinese leaders might have hoped.
The level of political risk with the US is also rising. Bad taste aside, it is fair to say that the 9/11 attacks were a gift from the gods for China.
Washington, which until then had China in its sights as a "strategic competitor", has been preoccupied by the seamless war on terror ever since. In the past three years, China has prospered in the war's slipstream like never before.
The early signs out of Washington are that this can't last. The IBM deal with Lenovo is an early indicator of this. If US neo-cons can make a fuss about China buying a boring old PC business, then imagine the storm they will whip up when Chinese companies buy something really serious.