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China's economy, the turbocharged engine of world growth, is starting to sputter. From a competitive standpoint, that may feel like good news, but what happens in Beijing doesn't stay in Beijing: The U.S. economy is inextricably linked to China's.

The long term isn't looking good for the greenback: Central bank managers don't see it keeping its status as the world's reserve currency. The short term's not looking so hot for the U.S. economy either: Housing prices are down another 4% year over year, and confidence is falling.

Despite turbulent times, U.S. markets are rising again. But is this a temporary bump, or the return of a bull market? The sharp-eyed analysts of Morgan Stanley and Goldman Sachs say its the latter, and their money is on strong growth ahead.

In most respects, China is a world away from the oil-dominated autocracies in the Mideast now seething with anti-government unrest. But it faces similar issues: high inflation and a troubling wealth gap that could fuel social upheavals, if Beijing doesn't make some big changes soon.

The U.S. trade gap widened to just under $500 billion in 2010, but that obscures impressive growth in global sales of U.S. goods. And the outlook for 2011 is even better. Still, to reach a trade surplus, America must solve two serious problems.

China has officially bumped Japan as the world's second largest economy. Japan reported its GDP grew only 1.8% last year to $5.47 trillion, while China's climbed 10.3% to $5.88 trillion.

To quell rapidly climbing prices, China has raised interest rates for the third time since October. But signs are growing that it may not be able to keep the problem under control. And despite the economic threat from inflation, China isn't likely to let its currency rise.

After years of exhorting China to increase the value of its yuan, the currency is finally rising. Why that's so is the result of the Fed's quantitative easing program. Here's how Bernanke managed to succeed where political wrangling fell short.

China's economy is booming, and Western nations are increasing their demands that its currency be allowed to rise to its natural value. Who knows if that will happen, but if you want to bet that it will, the Bank of China just made it easier: Now, Americans can open renminbi-denominated accounts.

They're gearing up for a potentially damaging round of currency interventions to help keep their economies competitive, especially against China. Says Brazilian Finance Minister Guido Mantega: "This is a currency war that is turning into a trade war."