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China Syndrome
By Mark Zandi

(FORTUNE Small Business) – For small businesses, there has been no greater burden over the past 25 years than a dwindling control over what they can charge customers. Thanks to China, that is about to change. For decades the increasingly undervalued yuan has meant a surplus of cheap Chinese-made goods arriving on U.S. shores. Those cheap goods helped big-box retailers such as Wal-Mart maintain everyday low prices while squeezing the margins of small businesses. But China's economy is overheating—the U.S.-China trade deficit is rapidly approaching $150 billion, double what it was in 2000—and the threat of double-digit inflation will likely force the country to strengthen its currency in 2005. The move will ripple through the U.S. economy, starting with Chinese goods' becoming more expensive. That could mean a breather for small businesses, which might soon be able to charge higher prices themselves. —MARK ZANDI