I was reading Stephen Roach's latest essay this morning. One of the matters that he raises is the incredible interdependance between China and the USA. He says, "This year the US will probably account for 35-40% of Chinese exports."

He also talks about the way that real estate price increase has led to this and the continuing fragility of the US, and global, economy as a result. He suggests that investors should be concerned about the impact of the 2005 oil shock on equity prices in the US and that secondary markets such as Europe will be hard to bring on line - particularly because of the logistical issues concommitant with such a change.

Tom Barnett blogs about this connectedness on his blog with the view that this sort of economic joining at the hip should mean that the US and China should be strategic bedfellows rather than strategic competitors.

This connectedness certainly means that China, with really only one major customer, can not allow the Renmimbi to increase in value. The risk would be too great that a key market would be damaged.

And all this is happening within the background of increasing oil demand, apparent limitations in supply, and the continuing threatening postures of the US and UK on the one side and Iran on the other....