Ratings downgrades on nine euro zone countries by Standard & Poor's late Friday - including France, Italy and Spain - sent a shiver through financial markets. But the move was long telegraphed, likely limiting any spillover.

A global economy slowing only gently would be an immense relief after a fraught end to 2011, but it is far from guaranteed.

Greek debt talks could collapse next week in a tussle over the size of losses banks should face. Tensions over Iran's nuclear program continue to threaten oil markets. And U.S. data last week showed surprisingly weak retail sales and a rise in jobless claims, a reminder that the U.S. recovery is not yet out of the woods.

So, even as signs suggest only a slight easing in global growth this year to a pace around 3 percent, the pitfalls are numerous. Prime among them is China.

Data on Tuesday is expected to show growth in China, the world's second-largest economy, cooled in the fourth quarter to 8.7 percent from a year earlier, against 9.1 percent in the prior quarter. It would be the slowest pace of growth since mid-2009 when the global economy was crawling out of a deep recession.

The biggest question is how much of the slowdown can be blamed on slackening worldwide demand for China's exports and how much on weakening domestic growth.

If China's internal growth is stalling, that would put yet another drag on countries such as Germany and the United States, which are counting on strong exports themselves to help compensate for sluggish growth at home.

U.S. trade data for November was mildly encouraging on that score, with exports to China up by 2.1 percent to their highest level in almost a year.

But data from China showed that in December demand slackened and imports from the United States fell 2.7 percent, and the nation's overall trade surplus fell to a three-year low, raising alarms around the world of a hard landing.

China's inflation rate also eased, and foreign exchange reserves declined in November and December, the first consecutive monthly fall since early 2009, another clear sign that China's days of export-led growth are waning and capital is leaving the country.

Asha Bangalore, an economist at Northern Trust in Chicago, zeroed in on another key trading relationship: China and Germany. Chinese imports from Germany increased by 4.2 percent in December, marking the slowest growth rate since October 2009.

"The broader implication of these trends is that not only is German business activity hit by a deceleration of imports of China but the intricate web of world trade has a wide reach and will translate into a setback in business conditions among other trading partners," Bangalore wrote to clients last week.

Germany's economy contracted by about 0.25 percent quarter-on-quarter over the last three months of 2011, deepening worries that the entire euro zone is slipping into a recession.

EMERGING MARKETS SLOW

A sharp slowdown in Chinese demand would also spell trouble for commodity exporters such as Australia and Brazil, whose fortunes are increasingly tied to China's. Brazil's consumers already are pulling back sharply, and the central bank next week is expected to lower interest rates to 10.5 percent, the fourth cut since August to support faltering growth.

Figures from other Asian countries offer a few more clues on how China's domestic economy is holding up.

Exports to China are a tricky indicator because it is never entirely clear how much is destined for domestic consumption and how much represents partially finished goods ultimately heading to the United States or Europe. But the pattern is clear: the flow of goods into China is slowing, including from other Asian countries.

Taiwan's export growth in December was the weakest in more than two years, and exports to China fell 2.9 percent from a year earlier, a second straight month of negative readings.

Malaysia has also reported significant slowdowns in exports to China, and South Korea has warned that its export prospects look gloomier in 2012, in part because of weakening demand from China, its top export destination.

A gradual, modest downshift in China's growth would be a welcome development for Beijing, which spent the better part of the past two years trying to cool the economy to get inflation back under control.

The tightening cycle may be over, but China is in no hurry to ease interest rates. Instead, the next move is likely to be a cut in the amount of reserves that banks are required to hold -- a step that could come as early as this week to meet demand for cash ahead of the Chinese New Year on January 23.

Those New Year celebrations make it even more difficult to decode China's economic data. For example, economists suspect that a surprisingly strong reading on manufacturing in December may have been tied to New Year's demand and will be reversed in the coming months.

Figures for January may look abnormally weak because factories typically close as hundreds of millions of people travel home to visit family. The New Year holiday falls unusually early this year; in 2011, it was on February 3.

"All the celebration and travel is putting a little kink in the economic data - not just on the mainland, but regionally," said Frederic Neumann, co-head of Asian economics at HSBC in Hong Kong.

(Writing by Stella Dawson; Editing by Leslie Adler)

• A Permanent Economic Emergency