No forecast of the world economy is complete without an analysis of China.
Many would say that, where China goes, so goes the world - a description once reserved for the U.S. economy alone.
These days, according to the latest World Bank methodology, China accounts for just over 15 per cent of the world economy, compared to the U.S. at 20 per cent and Canada at under two per cent.
And with growth in China averaging over 10 per cent of late, that means that China is contributing close to one-third of total global economic growth.
Not surprisingly, then, a chart of China's historical GDP growth looks like a chart of the world economy.
There was a boom of 11- to 13-per-cent growth in 1994-95, a slowdown to seven to eight per cent during the crisis-ridden period of 1997-2001, and a gradual upswing from 2002-2006.
The latest data from China showed growth of 10.4 per cent year-on-year in Q4/2006.
This is a bit of a deceleration from growth of over 11 per cent six months earlier, but given the reliability of the statistics, that's not saying much.
Looking beneath the headlines, though, reveals some early signs of a slowdown in China.
One of the greatest fears is that China will significantly over-invest, and that there will be a crisis and recession as the economy adjusts to that investment overhang.
Accordingly, a moderation in investment spending would be good news, and there is some.
Back in mid-2006, investment spending was rising at a pace in excess of 30 per cent annually, and the most recent data are showing 25 per cent.
To go with that, output of cement has slowed from over 25-per-cent growth to around 15 per cent.
Industrial production has also slowed from around 20 per cent last June to about 15 per cent most recently.
The trade data also looks promising. Although China's exports continue to grow at rates of 25 to 30 per cent annually, the trend in U.S. imports from China has seen a downshift in the past eight to 10 months.
More importantly, China's imports have slowed, from 25-per-cent growth to the mid-teens lately.
And, although the data is unreliable, retail sales growth has slowed from around 25 per cent to under 15 per cent.
This analysis suggests that not only is the dangerous growth in investment spending beginning to gear back, but the hoped-for expansion of domestic consumption spending may not be happening.
And just in time, too - China's inflation rate has begun to move noticeably higher.
CPI inflation was drifting between one and two per cent through 2005 and much of 2006, but late last year it started moving higher, and most recently is at 2.8 per cent.
The authorities are anxious to avoid an inflation outbreak, and have raised interest rates, restricted credit and allowed the yuan to appreciate gradually.
Money and loans growth have slowed in response.
What this all suggests is that more official actions will be forthcoming, if necessary, but a slowdown is increasingly likely, one way or another.
The bottom line?
It is too early to declare that China is slowing, but the early signs are there.
Once a consensus emerges on this, global commodity prices are likely to see another down leg.
(Stephen Poloz is a senior vice-president and chief economist for Export Development Canada. He can be reached at spoloz@edc.ca)
