Stock markets breathed a sigh of relief Monday and Tuesday after China held off lifting interest rates over the weekend. The conventional wisdom is that higher interest rates spell a slowing Chinese economy. And the Chinese economy is the world’s second largest, so everybody would suffer.

How true is that? Well, depends on where you are standing.

For parts of Asia, and especially for countries that sell lots of raw materials to China (see Brazil, Australia and Indonesia), that’s probably true. A decline in China’s voracious appetite for things that come out of the ground like oil and coal will have an effect.

But for places like the U.S., a slower growing China, hobbled by its fight against inflation, probably doesn’t matter that much. The U.S. still matters a lot more to China than China does to the U.S.

“The impact on the United States is small,” says T.J. Bond, Asia economist for Bank of America-Merrill Lynch. He figures China growth will moderate to 9.1% in 2011 from 10.3% this year. But that’s not causing him to revise down U.S. growth.

While China is a growing destination for U.S. exports, that still represents a small part of U.S. GDP.

“Policy in the U.S., fiscal and monetary, matters far more than the China economy does,” says Mr. Bond. BofA-Merrill will likely boost its U.S. 2011 GDP forecast if Congress passes President Barack Obama’s tax proposal, which includes $858 billion of tax cuts and other benefits.

In fact, there’s an argument to be made that a slowdown in China would help the U.S. recovery. Were Chinese demand for commodities to slacken, that would drive the price of oil lower. Cheaper gas prices in the U.S. would be like a stimulus especially for lower-wage consumers, who cut back on discretionary purchases when their income is eaten up by filling up the old SUV.

Alex Frangos