Markets around the globe -- beginning in Asia, where the Shanghai Index dropped 4.27%, continuing through Europe, where the FTSE 100 lost 3.10%, and ending in the United States, where the S&P 500 has already plunged nearly 3% -- fell today.

The bearish action was sparked when the Conference Board revised its leading economic index for China down from 1.7 to 0.3 percent. The Conference Board had initially released its index on June 15, but it had to retract its announcement and release an updated number because the previous number had a calculation error in it.

You may be wondering, what is the Conference Board and why does its Chinese index matter so much? If so, you're not alone.

It goes without saying that the United States and China have philosophical differences regarding how best to achieve balanced, sustainable global GDP growth.

Further, it's not likely that China will end its fixed-rate currency policy for the yuan: China keeps the yuan pegged at roughly 6.83 yuan to the dollar. U.S. manufacturers charge that the peg artificially undervalues China's exports, giving its companies an unnatural competitive advantage. China counters that the fixed yuan is necessary for its embryonic, vulnerable economy, and that the world benefits from the very cheap goods that stem in part from it.

China's GDP increase in the third quarter was 9%. Analysts expected that number to be closer to 10%. According to Reuters, "China's growth rate slowed to 9.0 percent in the third quarter, dragged down by the global credit crisis and a weak property sector, leaving the economy on course for its first year of single-digit expansion since 2002."

Who cares? Nine percent would be the envy of most economies. That is true unless a recession is viewed as relative to past growth rates. If the US economy is growing at 4% and that goes to zero, it means hard times. China's growth rate probably does not need to go anywhere close to zero for its economy to be in trouble.

China relies on exports to fuel most of its GDP. Those exports allow the government to bring people from rural areas to relative new cities to work in factories that produce goods for overseas markets. This has created a huge Chinese middle class which buys everything from stocks to consumer electronics devices. It may be telling that the Shanghai Composite, the major measure of China's equity markets, is down well over 50% from its all-time high set just last year. People in China may not be so flush

If China stops being a consuming nation, exports of US and EU goods like aircraft and software could fall sharply. The circle of exports and imports gets broken and the entire system falls apart.

Douglas A. McIntyre is an editor at 247wallst.com.

What might be considered a recession in the US is probably different from what a recession would look like in China. In the US, the economy has to have two quarters of negative GDP growth. In an economy like the one on the mainland, which has been growing at 10% a year, an economic calamity might begin if the move in GDP expansion slipped to 5%.

At a slower rate of growth, wage increases for China's middle class might stagnate. This group is the engine of the country's great improvements in consumer spending. Factory employment could drop if exports slowed due to a recession in Japan and the West.

Odd as it may seem, a GDP improvement that might be considered robust in the US could be a disaster for the Chinese.

According to Bloomberg, China's industrial output rose at the slowest rate in six years and much of that was due to a drop in export demand. The nation is now looking at tax cuts to improve growth prospects. That sounds a bit like the tax rebate program in the US.

The Chinese consumer fuels much of the import demand in the country. Many of those imported goods come from the US. It is a bit of a vicious cycle. China and America have become co-dependent

Douglas A. McIntyre is an editor at 247wallst.com.

A fascinating article in this week's Business Week explores the state of production in China, and surprisingly, it isn't as rosy as you might think. Dexter Roberts writes that Chinese manufacturers are getting pinched between rising costs and a rising Yuan.

Government actions are in part to blame, some taken, I suspect, a result of its participation in the World Trade Organization. New regulations require employers to provide pensions and longer-term employment, as well as giving workers the right to collective bargaining. Some tax advantages that had help reduce the cost of exported goods have also been discontinued. Together, these steps have raised the cost of production of some goods by as much as 50%.

The country's enormous thirst for raw materials has also required it to look further afield, toward the higher-cost providers of oil, steel, and other essential goods. The result has been felt most directly at the low-tech end, businesses that could most expediently flee to the new low-cost providers in Vietnam and India.

The government's goal is to replace low-tech, high labor and environmentally compromising manufacturing with more high-tech, high-profit business. However, as we've seen in this country, such businesses require smaller, more highly educated work forces. In a country with over a billion poorly educated but eager workers, losing entry level work presents a volatile problem for the Chinese government.

As you might have noticed, I have been focusing on Chinese companies over the past few days, seeking to highlight some sectors where the massive influx of tourism and business and money into China is having a positive effect.

What is more natural in a booming economy than advertising? As people's spending power increases, so too does the need for companies to market products for them to buy. And let's not forget: 2008 Olympics are being hosted in Beijing. This is going to bring a boost to the already growing arena of new media advertising.

Enter Focus Media Holding Limited (ADR) (NASDAQ:FMCN), China's largest publicly-traded advertising firm. This company specializes in "out-of-home advertising" -- in other words, it uses in-store, commercial location, outside light emitting diode (LED), and mobile handset networks to broadcast advertisements. In 2003, Focus Media went from being a traditional ad agency to focusing on the out-of-home market, and it was smart to jump into the game that early. After many acquisitions, it staked out the market terrain and are now the leader in the outdoor ad market, directly operating in 50 cities and indirectly in 36 more cities. It's flying along. Net income for 4th quarter 2006 was $30.1 million compared to the previous year's $9.4 million, and sales tripled to $68.3 million. This market is particularly important in China, where ads can capture bored people in long lines!

PetroChina Company Ltd (ADR). (NYSE:PTR), the petroleum and natural gas conglomerate in mainland China, released FY 2006 earnings figures today.

For FY 2006, net profit was up 6.6% to $18.38 billion. Overall revenues were up 25% from FY 2005, operating profit was up 5.7%. Crude oil production expanded less than 1% to almost 832 million barrels, while natural gas increased 22% in 1.38 trillion cubic feet. Taken together, crude oil and natural gas output increased almost 5% from FY 2005. That was the good news.

Now for the not quite so good news. Earnings growth in FY 2006 was slower than in FY 2005 when net income surged 25%. The second half of FY 2006 saw net income decline by 13%, mainly as a result of a decline in crude oil prices, coupled with higher exploration costs and larger than average refinery losses. PetroChina's refining operations sector posted a larger loss in FY than in FY 205, by almost 10 bilion yuan.

PetroChina stock is currently trading at $111.20 on the big board, up 89 cents after the earnings release.

Hedge funds are mysterious. Some of the managers are billionaires. There is little regulation and there are occasional implosions. More importantly, hedge funds have more than a trillion dollars in assets.

So if there are problems in the financial markets, it's probably a result of the devious schemes of hedge funds, right?

A recent piece in the New York Times looks at this. And, yes, hedge funds are getting the blame for the volatility in the Asian markets.

The theory does have some credence. Over the past few years, hedge funds have become a much bigger part of Asian markets, and the growth is likely to continue.

After all, hedge funds thrive on volatility. That's how they find short-term profit opportunities.

But can they really cause it? Maybe in some cases. But its tough to do this on a consistent basis.

Perhaps the big issue is that there appears to be a slow-down in the Chinese economy, which impacts all Asian markets.

The funny thing is, though, no one complained about the volatility when the markets soared. But once the inevitable correction hit, the hedgies become an easy target.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.