China's actions are making an increasing impact on Western stock markets.
Those who thought the credit crunch would see a decoupling of the Far East from the West have got it badly wrong. We are more coupled together than ever, but with China as the engine of growth pulling along the rattly, grumbling trucks of the Western economy.
Where China commands, the global economy follows.
Dangerous commodity
Don't believe me? Just look what happened on Wednesday afternoon. The Chinese government told its banks to stop lending to cool its economy and prevent an asset bubble, and global stock markets fell nearly 2%.
Commodities suffered a particularly hefty correction, which shows how dependent the sector is on demand from China.
Eurasian Natural Resources (LSE: ENRC), Xstrata (LSE: XTA), Lonmin (LSE: LMI) and Antofagasta (LSE: ANTO) were all down around 6%, while Kazakhmys (LSE: KAZ) and Anglo American (LSE: AAL) shed more than 5%, and Rio Tinto (LSE: RIO) and Vedanta Resources (LSE: VED) lost more than 4%. All as a result of a few comments from the Chinese government.
Miners aren't the only ones with severe exposure to China. Western politicians, markets and businesses are increasingly looking to the country to pull us out of the slump we have brought upon ourselves.
Kerr… Qing!
China isn't growing its economy for our benefit. And why should it? It's still resents the West for what the British Empire did to the Qing dynasty, and for the nasty stunt we played in the Opium Wars.
And despite its breakneck growth, with new figures showing its economy expanded 8.7% in 2009, and 10.7% in the final quarter, China remains much poorer than us, and is desperate to catch up.
Ma Jiantang, head of the National Bureau of Statistics, points out that 150 million people in China live on just one dollar a day, the UN's definition of poverty. "Despite the increase in our GDP and economic strength, we still have to recognise that China is a developing country," he said.
There's nothing like a bit of poverty for sharpening your instincts for making money, and China isn't going to let the West hold it back. The country is an economic giant, with a grudge. It's a scary combination.
Home is where the heart is
I don't blame China for seeking payback. It's a vast, powerful country with a proud history that feels badly treated by us in the past. It has seen hard times, and now a boom, and it knows which it prefers.
The Communist Party is also running scared. It has 1.3 billion people to keep happy, and needs to assert its control in troubled outlying regions such as Tibet and Xinjiang. It has to keep the economy charging along to hold onto power and contain popular frustration over a range of grievances from land grabs to local corruption.
The authorities aren't banning Hollywood blockbuster Avatar or hunting down dissidents because they feel confident and strong, quite the reverse. They are much more concerned about keeping their own people happy than ours. Just look at how it scuppered the Copenhagen summit when any agreement threatened to curb its own growth.
If Google can't cash in, who can?
China has no interest in making life easier for us. Western businesses report that it is a very difficult country to do business in. Copyright isn't respected. Corruption is rife. Business partners seem mostly interested in appropriating Western ideas rather than building a long-term relationship. There are increasing reports of industrial espionage, cyber sabotage and phone hacking against Western companies and governments.
Making money in China won't be easy. Google has made billions everywhere it goes, but it gave up in the Middle Kingdom.
China also has a worrying near-monopoly on rare earth metals used in key electronic products such as mobile phones. The Japanese electronics industry is particularly vulnerable. Worryingly, China doesn't yet play by the rules, just as we didn't during the Opium Wars.
And then of course we have the artificially depressed Yuan, which gives the West one export it doesn't want: unemployment.
China in their hands
I have a sneaking admiration for China's command economy. Its model is currently functioning better than our free market free-for-all, and I sometimes wish that Western politicians could command our banks in the same way.
But as China's command economy grows ever stronger, we must make sure it doesn't end up commanding us.
We can blame ourselves for many of the problems we face. The towering trade imbalance between East and West was one of the key factors behind the credit crunch, as China recycled its trillion-dollar export earnings into cheap lines of credit, which we foolishly used to strangle ourselves.
That model is still in place, and if Chinese consumers won't break it by starting to buy imported Western goods, the over-stretched Western consumer will have to do it, by cutting back on spending. Otherwise we are only storing up further problems for the future.
I'm still heavily invested in China. My portfolio is dependent on its growth, just like the rest of the West. But I'm not investing any more money there at the moment, because I think there is a danger of a correction.
And if that does happen, how will the global economy recover without its commander-in-chief?
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