China's Growth Threatened by Inflation, or Is It Deflation?

The stock market's advance was postponed for much of Thursday as investors fretted over a report of unexpectedly high inflation in China. If authorities raise rates, the thinking apparently goes, then Chinese growth will slow.

Another news item this week suggests that the bigger threat faced by China is from deflation. The average home price in Shanghai fell 10 percent in the first week of March.

The decline was not 10 percent from the same week a year ago, as such data are reported in the United States, but from the previous week. If this marks the start of a trend, then it could signal a wider slowdown.

It's not clear what effect a sluggish Chinese economy would have on corporate America. Other than copper and steel, what does China import?

Wall Street nevertheless remains fixated on conditions in China. Any sign of a significant reduction in growth there could be an excuse to sell stocks here.