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UBS has lowered its forecast for China GDP growth to 8% for 2009. According to Reuters, "It is the second time in less than three months that UBS has lowered its forecast for Chinese GDP growth next year."

Since China has been growing at a pace of over 10% a year for most of the last decade, an 8% increase would be quite a come down. It also raises the question of what a recession would look like in China. In the U.S., it is usually defined at two consecutive quarters of negative growth. This is a fancy way of saying the economy is shrinking.

In China, a recession might appear very different. It might only require a moderating of growth to put financial pressure on the middle class. The stock markets in China are already signaling trouble. The Shanghai Composite is off over 60% in less than a year.

If China's expansion slows it will probably be because it is exporting fewer goods to the West where a number of large economies could be suffering and consumers could be in distress. China would not be able to bring as many people into its large cities to work in factories. That, in turn, could cut the purchase rate of items like cars and electronics. With fewer people relocating, the value of real estate could also fall.

In other words, the Chinese economy does not necessarily have to shrink to hurt a lot of businesses and workers in the country. The term "recession" may be relative.

Douglas A. McIntyre is an editor at 247wallst.com.

Could the financial crisis result in the United States losing its status as the world's financial superpower?

Indeed it could, Germany's Finance Minister Peter Steinbrueck told MarketWatch.com.

"The United States will lose its status as the superpower of the global financial system, not abruptly, but it will erode," Steinbrueck said, MarketWatch.com reported. "The global financial system will become more multi-polar."

However, Steinbrueck clarified his statement in subsequent remarks to FT.com. "When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative," Steinbrueck told FT.com. Further, Steinbrueck repeated Germany's refusal to allocate public funds to acquire distressed/bad assets, arguing that the crisis is mainly hitting the United States.

The U.S.: a decade of descent

Economist Richard Felson concurred with Steinbrueck's analysis for the most part, but added that the U.S.'s decline, more accurately described as "a descent," is not irreversible.

"Globalization has played a role, but much of the U.S.'s descent in the past decade stems for policy mistakes, basically policies that didn't and don't work. The nation cut taxes before it went to war, creating a large budget deficit. A lack of a forward-looking energy policy helped balloon the trade deficit. And inadequate investment in infrastructure, education, and basic research is depressing economic growth below what it should be," Felson said. "The latter resulted in far fewer jobs begin created in the decade than what's required, leading to all sorts of problems, including the housing sector's implosion. The result has been a weaker U.S. economy with more structural problems, and an inability to project economic power. Meanwhile, the economic power of China, Russia, India, and Brazil has increased. I don't think that's what policy makers intended at the start of the decade, but that's been the result."

Sarah Gilbert is a former investment banker, Wharton MBA, and mama of three young boys. She keeps her finger on the pulse of hundreds of like-minded mamas through social media and reports on the mood of the biggest consumer group out there: Moms.

It was the middle of the night when I first heard the news about melamine-tainted powdered milk sickening and killing Chinese babies. I was up with my youngest, who was teething, and listening to BBC. As the night wore on, it seemed that the numbers kept growing. Many, too many. Outrageously many. I comforted myself, remembering that those thousands who were sick may be mildly ill, in a contamination situation even similar-seeming symptoms are blamed for the poison. But this is China, not noted for its transparency. Maybe the numbers were far higher. I shuddered, clenched my teeth, glad my baby never had powdered milk, glad I didn't live in China, sad for all those who were tossing and turning with a fatal fright.

Today's news that White Rabbit Creamy Candies, a popular Chinese candy sold in Asian markets in the U.S., were tainted with unacceptably high levels of melamine was not surprising. Why should candy be any more carefully screened than babies' milk? But it was devastating to millions of moms. It's hard enough for us to trust corporations with our kids' health; after all, the past 50 years hasn't exactly been award-winning. Sky-rocketing obesity rates. Enormous rises in childhood diabetes and heart disease. The as-yet un-attributed upswing in autism. Someone's to blame.

Wednesday afternoon following the market close, Nike Inc. (NYSE: NKE) will be reporting its fiscal first quarter earnings, and analysts are looking to see the company show earnings for the quarter of 92 cents per share.

The last time that the company reported was back on June 25, when it was able to beat out Wall Street estimates by two pennies, with a reported 98 cents per share for its fiscal fourth quarter, mostly a result of strong international demand, which was able to overcome weak consumer spending that hurt the company at home in the U.S. In fact, to find the last time that the company reported quarterly figures under Wall Street estimates, you would have to go all the way back to its fiscal fourth quarter 2006 when it missed by a penny, with a reported 70 cents per share.

On a year over year basis, should Nike come in with 92 cents per share, it would be a 16.9% drop from the $1.12 that it was able to earn during the first quarter of 2007.

Baidu.com (NASDAQ: BIDU - option chain) shares are diving today after the Wall Street Journal reported that speculation is rampant in China that the internet-search company accepted payments from dairy companies to keep negative items from appearing in its search results. BIDU admits that several dairy companies had approached the company, but says it refused all offers to screen negative news. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BIDU.

This morning, BIDU opened at $280.50. So far today the stock has hit a low of $201.15 and a high of $311.30. As of 1:05, BIDU is trading at $293.90, down $11.35 (-3.7%). The chart for BIDU looks neutral and S&P gives BIDU a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $360 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in 4 weeks as long as BIDU is below $360 at October expiration. Baidu would have to rise by more than 23% before we would start to lose money. Learn more about this type of trade here.

BIDU hasn't been above $360 at since May and has shown resistance around $325 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BIDU.

I am the Global Editor at MoneyShow.com and each week I interview an investing expert. This week, I spoke with Edmund Harriss, investment director of Guinness Atkinson Asset Management, who continues to like Asia despite its big selloff.

Q. Your Asia Focus Fund and China & Hong Kong Fund have stellar three- and five-year returns, but have not been immune from the recent global market slowdown. Many commentators have forecast the end of the China "bubble," cautioning that after the Olympics, China's fortunes may suffer. But you disagree, correct?

A. I believe China's growth prospects still look good in spite of the global slowdown. China's economy has benefited in the past from an export boom, and this will be hit by slowing demand from the US and Europe. But we should not forget that China has a substantial domestic economy which, although linked to external trade, does not depend on it exclusively. The Olympic Games caused production to slow as factories were closed to reduce pollution during the Games, but we now expect that to pick up.

China's prospects can still be heavily influenced by policy decisions which are backed up with significant reserves and budget surpluses. Since last year, the authorities have maintained a tightening bias as inflation rose to a peak of 8.7%. Now, [with inflation] at 6.3% in July and set to fall further, the government has shifted to a pro-growth bias. We expect to see some concrete announcements, which could include energy price adjustments to address the recent supply shortages of electricity and diesel fuel; tax boosts to support exporters; selected easing of bank lending controls, and slower currency appreciation against the US dollar.

Q. What is your near- and long-term forecast for the region?

General Motors (NYSE: GM) was counting on its rapidly growing sales in China to offset its troubles in the U.S. China has become one of the world's largest car markets and most estimates say it will move into first place within four or five years.

To the surprise of many, vehicle sales in China actually dropped in August compared with the same month a year ago.

According to The Wall Street Journal, the head of GM's operations in Asia "cut his prediction for 2008 growth in China's auto market, the world's second-largest after the U.S., to between 11% and 12%, down from the 12% to 15% growth he predicted in March." GM added that it expects the car market in China to grow at a double-digit rate for the next five years.

The news shows that GM may not be able to rely on extremely rapid improvement in markets outside the U.S. and Europe to balance bad business in the U.S. Part of GM's hope has been that, while it retools American plants to build fuel-efficient cars, overseas sales can keep its global revenue flat.

The car sales issue in China is broader than the effects on GM. The economy in the world most populated country is slowing. If that trend continues, the size of the Chinese middle class may stop rocketing up each year. That would mean that most of the people on the mainland who can afford a car already own one. If that is the case, GM and most other international car companies are going to have to tear up their five-year plans.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Oil falls, yet the price of gasoline is hanging up there, in the stratosphere. What's going on here?

Well, as is often the case in the oil and gasoline markets, the reasons are many.

First, the price of oil is falling on concerns that both the global economy and the U.S, economy will slow to a crawl (if not worse) due to the current credit crisis, says economist David H. Wang.

Oil, which fell $3.96 to $91.76 per barrel Tuesday at midday, has declined more than 30% since hitting a record high of $147.27 per barrel in July.

"The financial crisis suggests that emerging market oil demand growth will slow, and that's the primary reason you're seeing the price of oil decline," Wang said. "Strong demand for oil in China and India really boosted oil's price in the last three years. You lower that China-India demand and you have a different oil market."

Now, what about gasoline prices? Here, U.S. motorists will face a wide range of prices, depending on where they live in the U.S., economist Peter Dawson told BloggingStocks Tuesday.

"The biggest factor short-term for gasoline is Hurricane Ike, which shut down a fuel pipeline and refinery capacity in Texas," Dawson said. "This will reduce the supply of gasoline in the South, so price increases of 50 cents or more in the Southwest and Southeast will not be unusual."

China is one of the few countries in the world where the central government is so powerful that it can move interest rates, money supply, taxes, and fuel costs all in a very short period of time.

According to The Wall Street Journal, "Worries about the spillover from the U.S. appeared to lead Chinese authorities to shift decisively -- and more quickly than most anticipated -- toward supporting growth." If required, it would not be surprising if authorities on the mainland cut interest rates several times if that is what is necessary to maintain GDP growth above 10%.

China also has the power to put cheap gasoline and diesel into the economy by purchasing oil at market rates and then selling refined by-products well below market.

The trouble with all of China's efforts to keep expansion on track is that nothing can considerably improve its rate of exports if economies in the U.S., EU and Japan go to pieces. Consumer demand could simply dry up, leaving China's factories and shipping operations with tremendous capacity but falling utilization.

China is so tied to the fortunes of the U.S. that policy changes there are just band aids now.

Douglas A. McIntyre is an editor at 247wallst.com.

The dollar registered another week of impressive gains against both the euro and the pound. So where is the dollar headed from here, looking forward, a quarter or two?

BloggingStocks asked economists David H. Wang and Richard Felson to outline the dollar bullish and bearish views, respectively. The dollar finished the week at $1.4217 versus the euro and at $1.7927 versus the British pound. The greenback has advanced about 11% and 10% versus the euro and pound, respectively, in the last quarter.

Economist Wang said he sees a continuation of the dollar's rally in Q3 and Q4. Wang argues the U.S./global economic slowdown and accompanying credit concerns "will create a period of retrenchment on the part of institutional investors, and even once high-flying commodities won't be spared." The benefactor? The U.S. dollar, in a flight to quality, flight to safety.

"The dollar will rise for reasons that have nothing to do with U.S economic growth and everything to do with a lack of venues to put that capital to work productively," Wang said. "The prevailing psychology in Q3 and Q4 will be capital preservation." Wang sees the dollar strengthening to $1.30 versus the euro and to $1.65 versus the British pound by early 2009.

Conversely, economist Felson sees an end to the dollar's rally. Felson argues that the global slowdown will continue in Q3 and Q4, reducing both international trade levels and commodities demand. The former will see investors pull money out of stocks, the latter out of commodities as asset plays, with the euro and British pound benefiting.

With car sales in the U.S. and Europe in a disastrous decline, the markets of Latin America, India, and China were going to keep American auto companies from falling apart altogether.

That dream appears to be reaching a period of wakefulness. And, the reality is not terribly pleasant. China reported a fall-off of vehicle sales of about 6% in July. India is joining the party. According to The Wall Street Journal, "India's vehicle sales last month fell 4.4% to 94,584 cars from 98,893 cars a year earlier."

While the news may make Washington more sympathetic and help the likes of Ford (NYSE: F) and GM (NYSE: GM) to get huge loan guarantees, the longer-term outlook for global vehicle sales may be much worse than Detroit can imagine.

The theory has been that penetration of cars and trucks among consumers in China and India is low. As the middle class grows, so will the demand for new vehicles.

But, what if the theory is flawed? Slowing economies in developing countries may push back the growth of the middle classes by several years. The new car buying class may not emerge. The people in China and India who can afford cars may already own them.

Detroit was hoping it had been saddled with all the bad news it could handle. Maybe not.

Douglas A. McIntyre is an editor at 247wallst.com.

Doing business in China was supposed to be cheap. As the old saying goes "cheap gets expensive." The central government wants all of the foreign companies with local operations to have unions. All of those workers will be able to stage stop strikes if they like. They can ask for more cash. They can demand more benefits.

China does not say this, but getting U.S. companies to take on unions means that there is a good chance insurance and other services, which the government might pay for, can come out of the pockets of firms like Wal-Mart (NYSE: WMT) and McDonald's (NYSE: MCD).

According to The New York Times, "The union push is coming at a time when global corporations are already facing rising labor and commodity costs in China." Of course, the communist government probably forgot to mention the labor issue when corporations from the U.S. started moving into China to get cheap manufacturing and access to the rapidly increasing consumer base. A classic bait and switch move.

China is putting the screws to foreign companies and that may backfire. The temptation to move manufacturing to other countries like Vietnam and Mexico is likely to grow. China may see some of its best employers begin to leave.

The Chinese may want to see conditions improve for its workers who are employed by outside companies, but the push could put a lot of local workers out on the streets. Doing business in China isn't what it used to be.

Douglas A. McIntyre is an editor at 247wallst.com.

What might be considered a recession in the US is probably different from what a recession would look like in China. In the US, the economy has to have two quarters of negative GDP growth. In an economy like the one on the mainland, which has been growing at 10% a year, an economic calamity might begin if the move in GDP expansion slipped to 5%.

At a slower rate of growth, wage increases for China's middle class might stagnate. This group is the engine of the country's great improvements in consumer spending. Factory employment could drop if exports slowed due to a recession in Japan and the West.

Odd as it may seem, a GDP improvement that might be considered robust in the US could be a disaster for the Chinese.

According to Bloomberg, China's industrial output rose at the slowest rate in six years and much of that was due to a drop in export demand. The nation is now looking at tax cuts to improve growth prospects. That sounds a bit like the tax rebate program in the US.

The Chinese consumer fuels much of the import demand in the country. Many of those imported goods come from the US. It is a bit of a vicious cycle. China and America have become co-dependent

Douglas A. McIntyre is an editor at 247wallst.com.

Leading quantitative analyst Vahan Janjigian looks to American Oriental Bioengineering (NYSE: AOB), a maker of Chinese traditional medicines, among his latest featured stocks.

In his The Forbes Growth Investor, the advisor explains, "This market has enjoyed significant growth over the past several years due to several favorable trends." Here's his review.

"American Oriental Bioengineering is a pharmaceutical company that specializes in manufacturing and marketing plant-based traditional Chinese medicines (TCM) in China.

"Plant-based pharmaceuticals (PBP),which generated 82% of Q1 sales, are medicinal compounds derived from the leaves and roots of plants. These products, which are approved by the Chinese State Food and Drug Administration (SFDA), are used to treat various illnesses.

"The Chinese pharmaceutical market has enjoyed significant growth over the past several years due to several favorable trends.

What's a telling sign of slowing global growth? Continually decreasing oil demand forecasts.

The International Energy Agency again lowered its global oil demand forecasts for 2008 and 2009 as high prices and reduced U.S. consumption lowered overall demand for crude, the organization announced Wednesday. It lowered its 2008 forecast by 100,000 barrels per day to 86.8 million barrels, and 2009 estimate by 140,000 barrels to 87.6 million barrels.

The IEA's announcement had little impact on oil prices early Wednesday as oil rose 60 cents to $104.43 per barrel. However, it should be noted that two bullish factors also affected prices Wednesday: an OPEC announcement of a commitment to existing production quotas with a pledge not to exceed them, as some cartel members have in the past; and Hurricane Ike in the Gulf of Mexico, which threatened to damage oil rigs and infrastructure as it approaches the Texas-area coastline, according to weather.com.

Oil's price surge takes a toll

Oil has declined about 30% since hitting a record high of $147.27 per barrel in July 12. Economist Richard Felson told BloggingStocks Wednesday the dip in oil's price over the past two months is not nearly enough to blot-out the process-changing affect of oil's four-year price surge.