China is all the rage. It has a booming economy. Investors are intrigued. Some already own stocks in China. But is it a good time to buy into the Chinese dragon, especially if you are new to foreign investing? Let's look at another point in history, at another hot country, and see how that turned out.

The time was not that long ago: late 1970s to early 1980s. There was another major economic tsunami coming from the East. Japan was the biggest fish in the Pacific pond, and it looked preordained to take over the world, starting with the U.S. Japan was the country with all the right economic answers. It had a booming economy while America's was floundering. Companies looked to incorporate "the Japanese way of doing business." It had to be superior since the Japanese economy was flourishing.

The international research company, Ipsos Global Public Affairs, conducted a survey to determine the sentiment in emerging market countries including China, India, and Russia. They found it to be deteriorating rapidly. Consumer optimism dropped to 31% in November compared with a year ago. The largest drops were in China and India, with China dropping to 46% from 90% 18 months ago, and India dropping to 65% from a previous 88%.

One big factor for the drop in sentiment has been the sharp drop in crude oil prices from $147 per barrel to under $40 per barrel. It had a strong psychological impact on emerging market economies and brought home the notion that they were not immune from the worldwide economic slowdown.

Ipsos also surveyed 22 Western developed countries and found that nearly 75% of people were cutting back on entertainment, vacations, and luxury items.

The plan makes sense, at least on paper. GE (NYSE: GE) believes that it can offset any slowdown in its US business by the acceleration of revenue in China and India. It is, perhaps, one of the benefits of being a multinational.

The FT writes that, "GE's chairman and chief executive (Jeffrey Immelt) said the company's sales in emerging markets such as China and India were expanding at 20 percent a year, and there were few signs of this growth slowing."

But, GE's view is based on two assumptions that may not be true. The first is that a slowdown in the US will not spread to Asia and the Indian subcontinent. Much of the export income from China and India depends on demand in the US and Europe. if that demand slackens, there is no guarantee that their own economies will be able to continue growing rapidly.

GE is also assuming that growth in these countries, particularly China, will not come without a cost. Trade tensions between the US and the world's most populous country still exist. The China toy debacle demonstrates that. It would not take so terribly much for China to shut its markets to certain US goods and services, if it feels that it has been provoked.

GE's plan to keep growing outside the US looks good, for now.

Douglas A. McIntyre is an editor at 247wall st.com.

The U.S. Federal Reserve's bold action Tuesday to decrease short-term interest rates by 50 basis points, or one-half percentage point, served as clear signal to the markets that the Fed agrees that the housing slump and subsequent subprime mortgage default-induced credit crunch have helped slow U.S. economic growth to near-stall levels, but the interest rate cut and likely future cuts do not offer a downside-free economic horizon.

On the contrary, the easing and the growth stimulus that's likely to ensue will undoubtedly bring to the forefront an issue that the world's major industrialized economies have danced around for about a generation: namely, the inexorable rise in the price of oil.

Recall that in 2005 the Fed began to tighten monetary policy, i.e. started its short-term interest rate increase cycle, in part to slow the U.S. economy in order to take price pressure (inflation) off commodities, principally oil, but also natural gas, copper, aluminum, silver, corn and wheat, among others. Leaving aside for the moment the philosophical critique regarding whether its possible for a nation's central bank to slow inflation of globally-based commodities, the Fed's action did have the effect of slowing U.S. growth, which reduced price pressure on numerous vital commodities. Hence, from an inflation standpoint, the Fed's tightening can be interpreted as a qualified success.