I Am Very Tall

I'm not an economist, but I do like reading blogs from economists. One of the things that I've picked up on from some posts has been the idea that China is not a source of inflation, when you look at the data. Here's a clip from the WSJ:

“Imports constitute around 15% of U.S. GDP and around 13% of that comes from China,” the authors write in an article in the latest issue of China & World Economy, an English-language journal published by the Chinese Academy for Social Sciences. On their back-of-the-envelope calculation, that means a 1 percentage point increase in China’s inflation rate should lead to an increase in U.S. inflation of 0.02 to 0.03 percentage points. Yet their comparison of historical price trends in China with those in both the U.S. and Japan found the actual effect was even smaller.

And here's one from Paul Krugman:

In fact, overall, the US spends a little more than 2 percent of GDP on Chinese goods. That’s dramatically more than in the past. But it suggests that if Chinese prices rise 10%, the overall cost of living here would rise by less than a quarter of a percent. Every little bit hurts, but this isn’t as big a deal as a casual reading of this article might lead you to think.

Fine, so if the prices of Chinese imports go up, the total effect in the US won't be that big. But, what about the effect of China on the price of commodity inputs? Here's a graph of real oil prices in Feb. 2008 dollars.Now, what I've been reading is that the run-up in oil prices can be partially attributed to Fed Monetary policy. But the other thing that could be driving it is huge demand growth coming from China, and to a lesser extent India. I have no way of telling which of these two factors is playing a larger role. However, let's say that factor #2 is in fact big. Wouldn't that subsequently mean that China is playing a significant role in global inflation? Someone enlighten me.