Whenever Wall Street has a bad day lately, the financial media finds a way to blame China, which is a tad perplexing. Although the media may have finally awakened to China’s slowdown, the Chinese government has been plainly stating that it anticipates slower growth this year for several months now.

Granted, the media is fond of attributing the market’s rise or fall on any given trading day to just one or two factors. And while Europe has provided plenty of fodder for headline writers over the past year, the Continent’s debt crisis hasn’t provided any convenient excuses for the market’s performance in recent weeks. So China has become the latest catchall culprit.

Of course, the Chinese government isn’t known for the accuracy of its gross domestic product (GDP) forecasts–not once in the past decade has China accurately predicted its own growth. In some cases, China’s GDP forecasts have deviated from reality by a substantial margin, such as in 2007 when China missed its forecast by almost 7 percentage points. But as the chart below indicates, China’s GDP growth has always surprised to the upside.

While it might be tempting to assume the Chinese government doesn’t know what’s going on in its own backyard, there are differences between their communication style and the one we rely upon in the West.

For example, when Federal Reserve Chairman Ben Bernanke says that he expects the US economy to grow by 3 percent this year, investors can take that forecast at face value. But when Chinese Premier Wen Jiabao said that his government expects the Chinese economy to grow by 7.5 percent in a recent speech to the Chinese People’s Congress, you have to read between the lines because he’s actually telling you much more than anticipated GDP growth. For one thing, he’s saying the government is targeting 7.5 percent growth, which is different from forecasting. A target implies a minimum level of growth and he’s well aware of the fact that the Chinese economy is likely to grow at a much faster pace.

He’s also telling us that controlling inflation will also remain a goal for Chinese authorities. Throughout the first half of 2011, prices for all manner of goods quickly climbed higher, with the nation’s consumer price index peaking at 6.5 percent last July. As we saw with the Arab Spring last year, inflation can be a massively destabilizing force for a society and stability is perhaps the one thing the Chinese government values most. As a result, the government moved aggressively to check inflation, boosting bank reserve requirements and interest rates on several occasions throughout 2011. Inflation has since fallen to around 4.5 percent, a level the government seems to be comfortable with for now.

Finally, China’s premier is also underscoring the point that China is beginning to reengineer its economy, shifting focus from its exports to its domestic economy. Over the past few years, Premier Jiabao and a number of other Chinese officials have talked about their desire to build a more robust domestic consumer economy rather than relying on the global markets for growth. With over 1 billion citizens, that’s a huge potential market that is already being bolstered by growing wages and improving social insurance structures. But making that transition will necessitate a reallocation of national resources that will likely create a dip in growth in the meantime–but probably not by much.

So I would be very surprised if Chinese GDP grew by just 7.5 percent and so would many economists. While the media has seized on the government’s official 7.5 percent target for GDP growth, the consensus estimate of Western economists as reported by Bloomberg is 8.2 percent.

But just for the sake of argument, let’s assume for a moment that the Chinese economy is at serious risk of stalling. What could the Chinese government do?

For starters, both short-term and long-term Chinese interest rates are very much in positive territory, with the one-year policy rate currently set at 6.56 percent. That gives the People’s Bank of China ample room to turn to old-fashioned monetary easing in order to spur growth.

If monetary easing doesn’t succeed, bank reserve ratios–which currently stand at 20.5 percent–could also be reduced, potentially boosting credit availability. Businesses in China always seem willing to borrow during periods of steady credit expansion.

And failing that course of action, China still has the leeway to resort to unconventional stimulus measures, such as incentives backed by its cash-heavy national balance sheet.

With fairly high interest rates and bank reserve ratios and falling inflation, China can easily pursue a more accommodative stance in terms of economic policy. This flexibility coupled with the fact that China is likely to generate more growth than any other global economy this year makes anxiety about China’s prospects for growth seem like a bit of a red herring. Instead, it makes more sense to look for causes of market weakness closer to home.

What’s New

Yorkville High Income MLP ETF (NYSE: YMLP) launched last week, becoming only the second master limited partnership (MLP) exchange-traded fund (ETF) on the market after Alerian MLP ETF (NYSE: AMLP). The other six MLP exchange-traded products currently available are structured as exchange-traded notes.

According to the fund’s prospectus, it will track the Solactive High Income MLP Index, the components of which are screened based on current yields, coverage ratios and distribution growth. The index will have about 25 component parts, and weightings will be determined by capitalization and liquidity considerations. Interestingly, it was difficult to find much information beyond that, which is a worrisome approach toward transparency.

Aside from the uncertainty about how the index is structured, the fund’s anticipated yield of about 8.75 percent is certainly attractive. Additionally, the fund charges a 0.82 percent annual expense ratio, which makes it competitive with other MLP products on the market.

Portfolio Update

There was no portfolio-specific news last week.