As China Goes, So Goes The World?

I really like writing columns like this one ... where I get to poke and prod at the so-called "conventional wisdom".  It's always interesting to see what turns up when you challenge some basic assumptions.
 
Conventional wisdom is that China now calls the tune. You cannot read a commodity industry report without the assumption that China is the prime mover, and plenty of U.S. commentators have warned of the potential dire effects of a Chinese property bubble on U.S. equity markets.

But is this really true? Let's investigate. 

Calling the Tune on Commodities?On first examination, it would seem that the commodity folks have a point. After all, China is the incremental demand variable for a huge number of commodities. If you compare the iShares China 25 Index ETF (NYSE:FXI) to the iPath Commodity Index (NYSE:DJP), you see a pretty close correlation between the performance of the Chinese stock market and the performance of a basket of commodities. (For more, see Investing In China)

The full column can be read at: http://stocks.investopedia.com/stock-analysis/2010/As-China-Goes-So-Goes-The-World-FXI-VALE-BHP-INTC-WFMI-PFE0601.aspx.